Public Audit (Wales) Bill [HL]

Lord Evans of Temple Guiting: My Lords, I beg to introduce a Bill to confer further functions on the Auditor General for Wales; to make provision about the audit of accounts of public bodies in Wales and related matters; to make provisions about economy, efficiency and effectiveness in relation to public bodies and registered social landlords in Wales; and for connected purposes. I beg to move that this Bill be now read a first time.
	Moved, That the Bill be now read a first time.—(Lord Evans of Temple Guiting.)
	On Question, Bill read a first time, and ordered to be printed.

Energy Bill [HL]

Lord Davies of Oldham: My Lords, on behalf of my noble friend Lord Whitty, I beg to introduce a Bill to make provision for the decommissioning and cleaning up of installations and sites used for, or contaminated by, nuclear activities; to make provision relating to the civil nuclear industry; to make provision about radioactive waste; to make provision for the development, regulation and encouragement of the use of renewable energy sources; to make further provision in connection with the regulation of the gas and electricity industries; to make provision for the imposition of charges in connection with the carrying out of the Secretary of State's functions relating to energy matters; to make provision for giving effect to international agreements relating to pipelines and offshore installations; and for connected purposes. I beg to move that this Bill be now read a first time.
	Moved, That the Bill be now read a first time.—(Lord Davies of Oldham.)
	On Question, Bill read a first time, and ordered to be printed.

Health Protection Agency Bill [HL]

Lord Davies of Oldham: My Lords, on behalf of my noble friend Lord Warner, I beg to introduce a Bill to establish the health protection agency and make provision as to its functions. I beg to move that this Bill be now read a first time.
	Moved, That the Bill be now read a first time.—(Lord Davies of Oldham.)
	On Question, Bill read a first time, and ordered to be printed.

Gender Recognition Bill [HL]

Lord Davies of Oldham: My Lords, on behalf of my noble and learned friend Lord Falconer of Thoroton, I beg to introduce a Bill to make provision for, and in connection with, change of gender. I beg to move that this Bill be now read a first time.
	Moved, That the Bill be now read a first time.—(Lord Davies of Oldham.)
	On Question, Bill read a first time, and ordered to be printed.

Fishery Limits (United Kingdom) Bill [HL]

Lady Saltoun of Abernethy: My Lords, I beg to introduce a Bill to make provision for the United Kingdom to withdraw from the common fisheries policy of the European Union; to amend the Fishery Limits Act 1976; and for connected purposes. I beg to move that this Bill be now read a first time.
	Moved, That the Bill be now read a first time.—(Lady Saltoun of Abernethy.)
	On Question, Bill read a first time, and ordered to be printed.

Committee of Selection

Lord Brabazon of Tara: My Lords, I beg to move the Motion standing in my name on the Order Paper.
	Moved, That in accordance with Standing Order 64 a Committee of Selection be appointed to select and propose to the House the names of the Lords to form each Select Committee of the House (except the Committee of Selection itself and any committee otherwise provided for by statute or by order of the House) or any other body not being a Select Committee referred to it by the Chairman of Committees, and the panel of Deputy Chairmen of Committees; and that the following Lords together with the Chairman of Committees be named of the committee—
	B. Amos (Lord President),
	L. Cope of Berkeley,
	L. Craig of Radley,
	L. Dubs,
	L. Grocott,
	L. Roper,
	V. Slim,
	L. Strathclyde,
	L. Trefgarne,
	B. Williams of Crosby.—(The Chairman of Committees.)

On Question, Motion agreed to.

Address in Reply to Her Majesty's Most Gracious Speech

Debate resumed on the Motion moved yesterday by the Lord Ashley of Stoke—namely, That an humble Address be presented to Her Majesty as follows:
	"Most Gracious Sovereign—We, Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament."

Lord Sainsbury of Turville: My Lords, in opening the debate, I would like to outline the DTI Bills for this Session and the pensions Bill. I will also describe the work that my department is undertaking to improve productivity in UK industry through stimulating innovation, and the wider aspects of industrial relations policy that we are currently considering.
	The DTI's Energy Bill implements the Government's commitment to delivering a truly sustainable energy policy. The energy White Paper, published in February this year, set out a new strategy, based on the four pillars of environmental protection, energy reliability, competitive markets and affordable energy for all. We are now delivering that strategy, and the Energy Bill will contain legislation to deliver some of the key commitments relating to support for renewable energy, provision of secure and reliable energy supplies and more transparent market regulation. It will also fulfil our commitment to establish a single wholesale electricity market for Britain, bringing greater choice for Scottish consumers and the benefits of a GB-wide market to all generators, including renewables. The Bill will also create a nuclear decommissioning authority as a new public body to provide long-term strategic direction to the clean-up of Britain's nuclear legacy.
	The Bill on company law will address those recommendations of the post-Enron reviews that require primary legislation. We are moving quickly to put those priority measures into law, ahead of the overall review of company law, which we shall bring forward as soon as it is ready. The Bill will support the measures already taken, such as action by the audit firms themselves to rotate audit partners, and the improvement and restructuring of the regulatory system for accounting and audit. It completes the UK's thorough and balanced response to the problems revealed by scandals such as Enron and will ensure that our financial reporting system remains among the best in the world.
	The company law Bill also creates the community interest company, responding to a proposal from the Strategy Unit report on the voluntary sector—Private Action, Public Benefit. That proposal was widely supported. The community interest company will provide a simple, accessible and ready-made corporate form for many social enterprises. It will be more lightly regulated than charities and will offer a useful alternative to existing forms such as industrial and provident societies and ordinary companies. Community interest companies will be suitable for many areas of activity including regeneration and neighbourhood renewal, complementing core public services in areas such as leisure and community transport, and community self-help. They are a concrete example of the Government's willingness to encourage and facilitate social enterprise as a positive force in our economy and society.
	We are committed to encouraging employers and employees to work together. The employment relations Bill will contribute to a stable economy and high performance workplaces through measures to encourage greater participation in the workplace. It provides for new powers to implement the CBI and TUC framework agreement on the EU Information and Consultation Directive, and improvements to the statutory procedure for recognition of trade unions by employers, where the majority of the workforce is in favour.
	The Bill is founded on the principles of better regulation. It will meet our commitment to examine how the Employment Relations Act 1999 is operating in practice by implementing the findings of the full scale review of the Act which the DTI has undertaken. The review found that the Act has worked well and does not require substantial amendment. The Bill will therefore build on the success of the Employment Relations Act by introducing targeted measures to improve the law. For example, it strengthens protections for workers who wish to be represented by a trade union or make use of trade union services; improves protections for workers who wish to take official and lawfully organised strike action; and improves the operation of individual employment rights, including improvements to the national minimum wage enforcement regime.
	Finally, the Government are committed to long-term reform to ensure that the people of this country enjoy a sustainable, fair and secure income in retirement. That is why we shall bring forward a pensions Bill, alongside the measures we have already announced radically to simplify the tax rules on pensions. We need to renew the pensions partnership that is the bedrock of how Britain has long provided for itself in old age. Employers, financial institutions, ordinary people and the state are all essential players in this partnership.
	The measures we shall lay before this House will build on a sustainable system of state provision, ease financial and administrative burdens on employers, seal the pensions promise for ordinary people by strengthening the protection of members' benefits, and enable people to plan for their retirement and make informed choices about saving and how long they work. The pensions Bill will be a cornerstone of our reform programme.
	These measures will be introduced at a time when we are experiencing the longest unbroken economic expansion on record. This is despite a period of global uncertainty and recession in almost all our major trade partners. Since 1997 output growth in the UK has been more stable than in any other G7 country.
	Employment has increased by nearly 1.7 million since spring 1997. Nearly 28 million people are in work, close to record levels. Over the past year unemployment has been close to record lows on both the claimant count and the internationally accepted ILO measure. The claimant count remains below 1 million, something that has not been achieved since September 1975. ILO unemployment has remained close to its lowest levels since 1979.
	At the same time inflation remains close to target and is forecast to continue to do so over the coming years. The UK is benefiting from the longest period of low, sustained inflation since the 1960s. Interest rates are close to the lowest levels seen since 1955.
	Prospects for the world economy are also improving—seen in business confidence indicators, better financial conditions and rising stocks markets. The global recovery is still very dependent on developments in the US but there are encouraging signs that activity is gathering pace there. Within the euro area, Germany, France and Italy have all come out of the recession they experienced early this year. However, it is still difficult to assess the underlying strength of the global economy. While we remain confident in the potential for stronger growth, significant risks remain and we must stay vigilant.
	Looking ahead, improvement in the global outlook and strong domestic economic fundamentals will allow the UK economy to continue to expand steadily. The Bank of England's latest inflation report recognised that the outlook is now improved since its previous report was published in August. The new central projection indicates that growth is expected to be at, or a little above, trend throughout the forecast period.
	But we should not be complacent about the challenges ahead. Our productivity still lags behind the USA and many of our European partners.
	We have identified the drivers of productivity and have put in place measures to improve the UK's performance. One of these drivers—alongside competition, enterprise, investment and skills—is innovation, the successful exploitation of new ideas. Innovation is becoming of increasing importance, both for businesses and for the economy as a whole. This is for two reasons.
	The first is simply globalisation. Trade liberalisation and a rapid fall in communication and transport costs mean that the UK has increasingly to compete against countries with significantly lower labour costs and reasonably well educated labour forces. In 1850 it took nearly a year to sail—or send a message—around the world. Now, you can fly around the globe in a day or so and send an e-mail anywhere almost instantaneously. At the same time wages in China are less than 5 per cent of those in the UK. Hourly labour costs in Korea are just over half UK levels, and the proportion of graduates in the working age population is almost identical to ours.
	The second reason innovation is so important for companies and governments involves the major advances taking place in science and technology. Today technology and scientific understanding are changing our world faster than ever before and developments in ICT, new materials, biotechnology, new fuels and nanotechnology are unleashing new waves of innovation and creating many opportunities for entrepreneurial businesses to gain competitive advantages.
	In the UK we have some sectors that lead the world in innovation: aerospace, pharmaceuticals, biotechnology, financial services and many of the creative industries. Some firms in all sectors are global leaders. However, our overall performance is no better than average.
	A good indicator of technological innovation is the level of business R&D. The latest data for 2001 show the UK well behind the US and only slightly ahead of the EU average. However, it is encouraging that after a steady period of decline from 1.5 per cent of GDP in 1981 to 1.18 per cent in 1997, the trend line is now moving upwards to 1.28 per cent in 2001.
	The challenge for the UK is to understand why our innovation performance is not as good as it should be and how best government can contribute to improving our performance.
	The innovation challenge has been a clear theme of the Government's policy making since 1997. In that time we have published three White Papers: Our Competitive Future—Building a Knowledge Driven Economy (1998); Excellence and Opportunity—A Science and Innovation Policy for 21st Century (2000), and Opportunity for All in a World of Change (2001).
	We have put in place the key building blocks of an innovation-driven economy, in areas such as macro-economic policy, fiscal policy, competition policy, trade policy, and education and skills. We have also invested in the creation of new scientific knowledge. In 2002–03, the science budget stood at £2 billion, and that figure will increase by 10 per cent a year in real terms until 2005, when the science budget will be nearly £3 billion. That will mean that in the eight years since 1997 the science budget will have more than doubled.
	But there is more that we need to do, and over the past year the Department of Trade and Industry has been co-ordinating a review of innovation policy in the UK, which will be published in the coming weeks. The analysis prepared for the review—it was published last week—highlighted areas of great strength for the UK, such as the continuing excellence of the science and engineering base and the size and sophistication of our financial markets. However, there is also room for improvement in a number of areas, which the forthcoming review will seek to address.
	The Government have also commissioned Richard Lambert to review links between universities and business and how those can be improved. His report on emerging issues highlighted the many current examples of good practice—how universities and businesses were working effectively together. We look forward to the final report and his recommendations on how good practice can be strengthened and shared more widely.
	Another area of great importance where the Government have taken action is that of the skills and competencies that firms need to develop new products, services and processes. Although we compare well at the higher-education level, our percentage of the workforce qualified to intermediate skill levels, of apprenticeships and of skilled craftsmen and technicians, is low. It stands at 28 per cent in the UK, compared to 51 per cent in France and 65 per cent in Germany. The Government plan to increase education spending by 34 per cent to 5.6 per cent of GDP by 2005–06. We have also recently issued the skills strategy, which seeks to have a major impact on the skills deficiencies that we have, particularly at the intermediate level. We need to work closely with employers, trade unions and the education and training sector to deliver the strategy.
	We have an enviable record of stability and growth in the past few years. But we live in a fiercely competitive global economy and we need to pursue vigorously our programme of micro-economic reform, so that we can improve our rate of innovation and compete effectively against the low-wage emerging economies.

Lord Higgins: My Lords, there is universal agreement that the programme set out in the Queen's Speech is very heavy—23 Bills and seven draft Bills. That will inevitably put a major burden on your Lordships' House. Immediately after the end of the previous Session, the Leader of the House of Commons, Mr Peter Hain, made some critical remarks about how we had been dealing with legislation. Those were totally unjustified. We were carrying out our duty to act as a revising Chamber.
	The fact is that we now carry an ever-increasing burden because programming and other devices in the House of Commons mean that it is simply not scrutinising legislation as used to be the case. That is a major problem. We are not simply dealing with what the Commons has expressed a view on; in many cases, we are dealing with huge chunks of Bills that are completely raw and have not been considered by the Commons in detail at all. The burden on us in this House will be very substantial, but we shall carry out that duty as an Opposition as best we can.
	No doubt we will have a wide-ranging debate today, including a contribution from the right reverend Prelate the Bishop of Hereford. I understand that, sadly, the debate will be his swan song. He has made major contributions to our debates, and we shall certainly miss them.
	There is always an element of uncertainty about debates on the Queen's Speech. One is never quite certain what is going to happen next; for example, a moment or two ago, I had not quite anticipated the speech just made by the noble Lord. In winding up a debate on a previous Queen's Speech, I was rather taken by surprise because the debate that I had expected to concentrate on pensions turned out to be almost entirely devoted to the euro. Perhaps I might say a word or two about that before I turn to work and pension measures.
	On a day when the Financial Times carried the main headline on its front page:
	"Sanctions deal leaves euro pact in tatters",
	it seems quite extraordinary that the Government should include in the Queen's Speech the statement:
	"A draft Bill will be published to enable a referendum to be held on the adoption of the single currency, subject to the Government's five economic tests being met"".—[Official Report, 26/11/03; col. 3.]
	The first part of that statement was, of course, drafted by Mr Blair and the second part by Mr Brown. The reality is that there have been dramatic developments in Europe. Perhaps in addition to the five extremely vague tests, which are open to almost any interpretation, we should add one to say, "Providing that the Germans and French are going to stick to the rules". We thought all the rules were set in concrete, and that turns out not to be the case.
	I shall make a personal suggestion. If we are to have a draft single currency Bill, one might combine it with a referendum Bill on the constitution. As an economist, I have always been in favour of economy of scale, so perhaps we could have the vote on the same day.
	I turn to work and pensions, and refer immediately to the draft disability Bill so warmly supported yesterday by the noble Lord, Lord Ashley of Stoke. We certainly believe that there is an overwhelming case for the Bill. There are serious loopholes in the Disability Discrimination Act. However, the worry expressed very clearly by disability rights bodies is about the delay. The Bill is to be a draft Bill, but the matter has been mulled over for years. My impression is that there is very largely consensus on it now, so we share the disappointment expressed by the Disability Rights Commission and others yesterday, immediately after the Queen's Speech, that it is not a substantive Bill. If it is to go for further consultation, it would probably be quicker to use a Joint Committee of both Houses rather than scrutiny by the departmental Select Committee in another place, which has so many substantive responsibilities.
	The Minister referred briefly to pensions. As for the state provision of retirement pensions, almost all the industry bodies that responded to the Green Paper called for state pension reform. We on this side of the House have put forward substantive proposals with regard to the position of the basic state pension. Without a firm and adequate state pension, more pensioners will be means-tested and incentives to save will be reduced. Every group, from the IPPR and Age Concern on the Left, through to the National Association of Pension Funds, the Pensions Policy Institute and the engineering federation, call for reform of the state pension to be given priority.
	The Minister referred to simplification. Certainly, we would welcome that. However, the Chancellor of the Exchequer's obsession with means-testing and tax credits has led to unbelievable complexity. It would take almost the whole of the time that I have available to list the number of different credits that have been introduced, abolished, reintroduced, and so on. Since October 1999, the Government will have introduced five new tax credits for families, scrapped four of them, and introduced three more.
	The matter is unbelievably complex—so complex that even the Inland Revenue is now incapable of comprehending it. As reports have recently shown, it is not paying credits to those entitled to them, but is paying credits to those not entitled to them. There is no sense in it. The Government's own assumptions about take-up show that a huge percentage of those entitled to tax credits will not receive them, because they are too complicated. In addition, we have seen that something like £2 billion has been paid out by the Inland Revenue wrongly, as was reported the other day.
	I turn briefly to a number of other specific issues. There are a considerable number of them. On baby bonds or the child trust fund, there have been widespread reports in the press that the Home Secretary is concerned about the risk of fraud and that he regards the proposals as inadequate. How will asylum seekers' children be affected? Will they receive the child trust fund payments? As the financial services industry will be underwriting the system, what remuneration is it expected to receive? I put that question to the noble Lord, Lord McIntosh. What payments is it envisaged will be made to providers of arrangements under the child trust fund? Will the figure be 1 per cent, as in the case of stakeholder pensions, which has resulted a much lower take-up than we had all hoped, or will it be a higher figure? Those engaged in bringing forward a product will need to know that.
	The Minister referred briefly to company pensions and the pensions Bill. Before 1997, our company pensions system was the envy of the world. The amount invested in such funds in this country was more than was invested in all of the company schemes in the rest of Europe. That system has been undermined by the Chancellor's action on ACT, by falling annuity rates, by the stock market's collapse, the introduction of FRS17, and so on. The number of company pension schemes that have closed is tragic. According to an NAPF survey, only 19 per cent of companies now offer a final salary pension scheme to new employees and 41 per cent of those that used to do so have closed them in the past year. That is a disastrous situation for many people. The vast majority of stakeholder schemes are simply empty boxes with no contributors in them.
	The entire system of tax credits and minimum income guarantees is undermining the system that we have so long regarded as important. The pensions Bill, which is designed to deal with companies that become insolvent—and welcome though its proposals may be when we examine them in detail—is a sticking plaster over an open wound. That is very worrying indeed.
	Until last December, I was the chairman of a company pension fund. I went to visit the finance director of the company in question. Having managed to maintain a final salary scheme for so long—the decision not to change it to a defined contribution scheme had been a marginal one—I had to point out to him that the Government were now introducing their pensions Bill and that the company would have to pay a premium in case some other firm were to go bust. There is an element of moral hazard in all of that, but there is no doubt that the scheme will, on the whole, lead to more closures of final salary schemes. That is a matter of considerable concern.
	I shall put another specific question to the noble Lord, Lord McIntosh. The estimates of costs from sources within the industry seem to vary from a £1 billion a year to three times that amount. What is the Government's estimate? In particular, as the CBI has asked, will the Government be the guarantor of last resort? I presume that the Bill is sufficiently advanced for the Minister to be able to provide a clear answer to that question when he addresses the matter this evening. The US experience in that regard is not reassuring. There is a huge deficit in its guarantor scheme. We must take that into account when we examine the proposals, which may well prove worth while as the details emerge.
	I turn to a number of specific matters to which I shall speak more briefly than I would wish to do, but we can return to them later. As I understand it, the registration of civil partnerships is to be part of a substantive Bill rather than a draft Bill. My noble friend Lord Strathclyde referred to the issue yesterday. The system for taxing the inheritance of those couples should be comparatively simple. However, in other regards, it is certainly not; for example, what will be the position on the equivalent of widows' benefits? One of the curiosities of Beveridge's legacy is that individuals who are married receive a widow's pension to which they have contributed no more than would be the case if they were single. That is a situation that has developed over the years. What will the position be for same-sex couples? Will they receive a widow's pension, or will both of them have to contribute in the way that applies to individuals? That is but one example of a question that will be asked about the Bill. Huge complications will need to be addressed. It is a classic case of a draft Bill rather than a substantive Bill being required. Those issues are very complicated. I was to glad to hear my noble friend the Leader of the Opposition in another place say that there should be a free vote on the issue.
	I turn to two further matters. The noble Lord referred to simplification. We would welcome simplification of the tax system for pension schemes. However, there is widespread concern that the £1.45 million cap on individual pensions will affect far more people than the Chancellor originally expected. The number of those people seems to have risen from 5,000 to 300,000 people, rising to almost 600,000 in the future. We must consider that issue carefully when we discuss it. Noble Lords on these Benches have proposed that the limit should be completely removed (apart from there being a restriction on the amount that can be taken as a tax-free sum on retirement) provided that everyone in a company's workforce is given access to a pension scheme on the same terms.
	I shall devote a few words to the tragic situation of Equitable Life. Nobody envisaged at the outset that the Penrose inquiry would go on as long as it has. As was pointed out from the Liberal Benches a few days ago, the length of the delay has meant that many Equitable pensioners have seen a massive reduction in their pension after they have retired. I received more letters from them a few days ago. The regulation of Equitable Life has been a lamentable failure. The task of the regulator is simply to protect policy holders; and policy holders have not been protected. That matter must be resolved without further delay. It is regrettable that the ombudsman has not taken over responsibility for the matter, but has chosen to wait until Penrose reports. The delay is a serious problem.
	I turn to annuities for over-75s. I notice that the noble Lord is waving. I am not responsible for the fact that the Minister spoke for such a short time. I gather that the normal duration for such speeches is 20 minutes, but I shall not speak for much longer.
	Your Lordships' House has voted twice to remove the age limit of 75 for taking out an annuity, but it has been overturned in another place. The issue remains a source of justifiable complaint. It is more so at the moment because government borrowing is going through the roof, which will inevitably lead to increased interest rates. If that happens, someone who is 75 next week will have to take an annuity at present rates, whereas, if he could hang on perhaps for another 18 months, he would get a higher rate which he would get for the remainder of his life. This is a long overdue reform, and we really must sort out this particular problem.
	I have no time to discuss in broad terms the economic situation. We shall no doubt have what used to be called the "Autumn Statement"; it now seems more like a Christmas saga of the Pre-Budget Report. We can debate these matters then. However, many issues are causing grave concern. There is a massive increase in private debt, particularly on credit cards. There is a massive increase in government borrowing, which is likely to result in increased interest rates. The conjunction of those two things may create a very serious situation indeed in the housing market and elsewhere. All I do at this stage is simply to refer to today's report from the OECD which clearly states that there are serious worries about the Chancellor's prudence. I share that concern. However, we look forward to hearing the rest of the debate on this set of issues.

Lord Newby: My Lords, I join the noble Lord, Lord Higgins, in saying how sorry we are that this will be the final speech in your Lordships' House made by the right reverend Prelate the Bishop of Hereford. The right reverend Prelate was one of a number of your Lordships who made me feel very welcome in this House when I first joined. I am sure that we will all be very sorry that he will not be contributing to our deliberations in the future.
	We have a very broad topic for discussion today. I, like the noble Lord, Lord Higgins, will attempt to gallop across a very broad field. I should like to start with the economy. I think that the state of the economy is like the curate's egg—undoubtedly some aspects are positive. Overall growth remains much more satisfactory in the UK than in a number of other competitor countries. However, if one looks at the components of growth and in particular the extent to which it has been fuelled by the massive increase in government expenditure this year, one will see that a number of questions can legitimately be asked about where the economy will be in the medium term. Inflation, which is low and looks sustainably low, is the other positive area. At a later stage, however, we will need to discuss a number of issues about how the Government will amend the inflation target when they introduce the harmonised index. But that can wait for another day.
	There are also a number of serious question marks against the economy. As we heard earlier this week, investment in manufacturing is down to its lowest level for 20 years. Ironically, a major reason for that appears to be that businesses are using improved revenues to deal with their pensions problems. I will come to pensions later.
	The Minister described the major problem in innovation. While I accept that he personally has worked very hard in this area, it remains an area of relative failure with deep-seated roots. For example, it is a major source of worry that, on the latest available figures, UK expenditure on higher education is 26th out of 33 OECD countries. However, noble Lords will not be surprised to know that we on these Benches do not believe that top-up fees are the answer to the problem.
	An underlying problem, of course, is that the public finances are deteriorating. The public sector current deficit in this financial year is likely to be £8 billion greater than forecast at the beginning of the year. The National Institute for Economic and Social Research predicts that, far from decreasing in the next couple of years as the Government predicted, the deficit is likely to increase to £18 billion in 2004–05 and £22 billion in 2005–06.
	That raises serious questions about the golden rule being met. Having spent six years telling us how central it was to his strategy, the Chancellor is now downplaying its importance while, behind the scenes, apparently frantically scrabbling to re-designate expenditure from current to capital to keep within the figures. That is hardly surprising given what is being said about the likelihood of the rule being met. The national institute thinks that at best there is a 50 per cent chance of it being met in the next couple of years. The OECD, in the report to which the noble Lord, Lord Higgins, referred, is now arguing that if the rule is to be met, and certainly if Prudence is to retain her central place in the Government's finances, there is a strong likelihood that tax increases will be required in the next couple of years. Underlying that is a real question about the robustness of the Government's tax revenue expectations, which appear very much to have been based on the circumstances at the height of the stock market and dot.com boom. In terms of stamp duty and, more importantly, income tax revenues, those circumstances no longer obtain.
	I think that that raises a serious question about the Government's own forecasts and the way in which they are presented. Currently, the Government and the Treasury produce a single forecast with no information attaching to it about the margins of uncertainty about key target variables. There is no equivalent for the economy of the Monetary Policy Committee's fan chart of expectations of future inflation. I think that there is a strong argument for adopting that kind of methodology for the economy as a whole. However, the Treasury simply will not do it.
	In any event, I think that there are a number of questions about the increasing bullishness of the Treasury's forecasts compared with those of independent forecasters. I wonder whether the time has not come to introduce a British equivalent of the Congressional Budget Office in the US which produces forecasts for the benefit of the legislature rather than the executive. There are a number of ways in which we could do that in the UK; it has been suggested that the National Audit Office might take on the responsibility. However, given the centrality of forecasts in how we view the economy moving forward, I think that the idea should now be seriously examined.
	Consumer debt presents another concern about the current state of the economy. I now move on to consideration of measures that were not in the Queen's Speech. We were promised an early White Paper on consumer credit when we debated the issue in this House last month. We were led to believe that there would be a consumer credit Bill in this Session. However, there is no mention of such a Bill. Perhaps the Minister can explain where that Bill has got to. We do not believe that current consumer debt levels are at a crisis point in terms of the economy as a whole. However, the growth in consumer debt linked to housing has been steadily and significantly above earnings growth, and that is clearly unsustainable in the medium to long term.
	In the absence of a massive and sustained increased in mortgage interest rates, we do not see a likely collapse in house prices or a return to the high levels of negative equity of 10 to 15 years ago. However, it is extremely worrying that many individuals are running up high and unsustainable debt levels. Research published last week by J P Morgan pointed out that 3.3 million individuals are responsible for 44 per cent of the £178 billion unsecured debt in the UK, giving them an average unsecured borrowing of £24,000 each. The report concludes that the debt appears to be,
	"one of over-borrowing on unsecured terms by relatively low-income consumers",
	and to be disproportionately concentrated on non-homeowners.
	For those individuals, that is a major issue. Consumer credit legislation needs to be updated to deal with loan sharks and with the whole question of the aggressive marketing and advertising of products which seem to give one something for nothing. One can build up a balance and then transfer it somewhere else for six months. One does not have to pay anything on it. That balance can then be transferred somewhere else. It is hardly surprising that those under financial pressure see that as something for nothing—a maxim which is unknown in economics and certainly in the financial services industry.
	I move on to Bills that are in the Queen's Speech. The noble Lord, Lord Higgins, has already spoken at some length about pensions. The centrepiece of the pensions Bill is, of course, the pensions protection fund to spread the risk of collapse across all final salary pension schemes. It is ironic that this Chancellor is introducing this measure, given his raid on pension funds with ACT and the fact that he continues to undermine the pension fund industry with a huge hike in stamp duty on long-term leases. That will come into effect next week and will have a major impact on the commercial underpinning of that part of pension funds.
	When it comes to the Bill itself and to detailed questions about the pension protection fund, we shall want to question the Government on three issues. First, will they stand behind the fund as a lender of last resort, as they do in relation to the pool for terrorism insurance? We believe that their current intentions are not to do so. However, it would be a cruel deception on pensioners if the Government introduced the fund and it then went bust because too many individual schemes fell into insolvency.
	We shall also ask about the cost and complications of the pension protection fund and whether it might lead even more employers to close down their final salary pension schemes early. Certainly for large employers, we are talking about a fund which will cost many millions of pounds to subscribe to, and that will be an important consideration for them as they plan the future of such funds.
	Finally, we shall want to consider the question of reputable companies which are trying very hard to honour their pension promises and pay extra money into their schemes and the extent to which they will be protected from imprudently managed companies washing their hands of their pension liability. The "moral hazard" question, which has arisen in this area in the United States to a significant extent, is a major issue but currently we are unconvinced that the Government have come to grips with it. More broadly in relation to pensions, we shall monitor very carefully the operation of the pensioner credit, about which we have major misgivings, some of which have been expressed by the noble Lord, Lord Higgins.
	Moving on to other areas of legislation, we are to have a companies Bill. I do not know whether I am alone in being unsure what that Bill will now cover. I am unclear whether it will deal with the whole raft of issues in the draft companies Bill which have been discussed over a number of years or whether it will concern a far narrower question relating to accounting. If it is the latter, again, as with the consumer credit Bill, the interesting question arises of why we shall not see rather more in the Bill. This matter has been on the stocks for a long time. Are the Government able to tell us anything at all about the limits of the Bill and the extent to which issues are not covered by it? Can they also tell us when they plan to bring forward legislation covering everything else that needs to be dealt with in terms of reforming companies legislation?
	We are happy to give a very warm welcome to the community interest company Bill—an area in which we have been seeking legislation. The Bill will attempt to introduce a balance between flexibility and regulation for community interest companies. That is long overdue. At present, it is extremely difficult for many groups and individuals who try to set up such companies even to decide what corporate form they should adopt—far less to do it. Therefore, it is a long overdue change.
	Baby bonds have all the hallmarks of a straightforward government gimmick. If £350 million per year is available to spend on benefiting children and given the whole raft of measures that could be taken, would one introduce baby bonds? We do not think so. The scheme contains a number of fundamental problems but one of its essential flaws and, in our view, one that presents a real problem is the extent to which it will help those who really need benefit as opposed to middle and upper-income earners, for whom this is just another ISA. We now have a baby ISA in addition to the individual ones. Given that we know that ISAs and stakeholder pensions have failed to attract savings from people at lower income levels because they do not have the money to save, the idea that this measure will effect a substantial change to the financial prospects of children from poor families is, frankly, a deceit.
	We also have a draft Bill on the euro referendum. That simply provokes in me a hollow laugh. The Bill is being brought forward at a point when we know that there will be no euro referendum. If it had been brought forward last year or the year before, there might at least have been a suggestion that there was a purpose to it. But we know for certain that we shall not have a euro referendum in this Parliament. Therefore, the Bill is an extremely strange way in which to legislate. We shall support it and hope that it will be passed, but we should be even happier if we thought that it would then be brought into effect. Currently we see no such prospect.
	The previous Session was a relatively quiet time for Treasury and DTI spokesmen in your Lordships' House. It seems that this Session will be extremely busy and we look forward to it with relish.

Lord Haskel: My Lords, unlike the noble Lord, Lord Newby, I thought there was very little about the economy in the gracious Speech. Perhaps, as my noble friend Lord Sainsbury suggested, it was because the Chancellor continues to maintain sound public finances. I am ignorant of economics but, from what I have heard, it seems to me that the Chancellor approaches the subject with five prudent golden rules that keep endogenous growth alive and that those golden rules are more effective than growth and stability pacts, whatever they might be.
	In the gracious Speech, and as stated by the Minister, it was said that the Government would encourage enterprise, and it is about enterprise that I want to speak. My question is: how will they do it? Enterprise is a very human and personal activity. It consists of things such as vision, management, productivity and innovation. Those skills are not easily taught or transferred. Indeed, many firms tell me that enterprise is at the mercy of impersonal forces, such as inflexible wages, exchange rates, industrialisation in developing economies, unlevel playing fields, pensions shortfall, new technology, poor access to capital and overbearing regulation, particularly from Brussels. Indeed, many see the decline of both enterprise and manufacturing as inevitable because of that. But are those the real reasons?
	I say at once that there is no need to be unduly depressed by the steady decline of manufacturing and its share of gross domestic product. That is happening in all developed countries and, as the Minister said, it is how we react that is important. I agree that it is inevitable that products and industries will leave a developed economy such as ours, but enterprise ensures that they are replaced by other products and industries of yet greater technological sophistication and which deliver higher value and higher productivity.
	Enterprise means that new firms come into markets with new processes and ideas. It is true that old firms will die, but that is part of the enterprise process. Indeed, we know that around 50 per cent of productivity growth in manufacturing over a decade is due to the entry of good firms and the exit of poor ones.
	What do those successful firms do that is different? It seems to me that they grasp their destiny firmly in their own hands. They are not victims. They sweep away the barriers of their own assumptions and, in that way, they seem to create their own luck and their own good fortune. They encourage and reward ingenuity, creativity, resourcefulness and initiative, items not on the balance sheet but without which there would be no innovation, no new products, no new services and no new enterprise. Instead of complaining about regulation, these companies seem somehow to reflect and adapt to the values of their communities and staff and to build up a special kind of loyalty in that way.
	Among many, that is still considered to be soft management, less effective than the hard management of mergers and acquisitions, downsizing and re-engineering, all of which appear in the accounts. But business schools and researchers, stock markets and financial institutions have been collecting data for years which show that that is the way that leads to improved productivity, improved profits and improved stock market value. It has always been a mystery to me why more firms do not follow that successful formula. A modern enterprising nation requires a people and business building culture rather than a financial engineering culture. Professor Porter strongly made that point in his recent paper for the DTI about UK competitiveness.
	The first barrier to sweep away is the separation between manufacturing and service. The idea that manufacturing is just making things is wrong. It is part of a highly connected chain from research through production to delivering services and satisfaction to customers. If managers decide that part of the chain is manufacturing in a low labour cost country, so be it, but reducing production cost is only part of delivering higher value.
	Sadly, outsourcing has become an end in itself. Accountants still convince many managers that they can improve their balance sheets simply by cutting manufacturing costs by outsourcing and writing up the value of their brands. Many forget that cost is not the only element in the value of a product. High quality and superior function are valued by customers, especially if such qualities are obvious to the consumer. But solving problems by innovation and imaginative good service are especially valued by customers.
	Enterprising management in a modern developed economy such as ours has to be a subtle mix of disciplines. It requires the vision to devise new sets of values—perhaps not yet recognised by financial markets—while building strengths in technology and design, devising new services and ways of customer support here in Britain while at the same time learning how to manage production both in low-wage countries and in Britain. Some of our leading companies, such as Rolls-Royce Aero-Engines, do that brilliantly. Some have failed and gone out of business but others have appeared to replace them.
	Such entry and exit should be welcomed and not hindered. It is not a sign of failure but the way an enterprising economy improves and progresses. It is one way in which competition works. Clothing companies, which originally outsourced their products to Asia to cut costs, are now in turn being forced out of business by firms such as Zara, which turn their stocks over every two weeks. To achieve that, they need to have their clothing made locally, perhaps in Britain, Spain or Italy. They have to incorporate that rapid production turnover into their sophisticated management system.
	Indeed, research shows that sectors with high rates of entry and exit achieve higher rates of productivity. However, that applies to manufacturing. We do not have enough information about the process in services. Therefore, I welcome the work done by the Advanced Institute for Management sponsored by the ESRC on these matters. One interesting initial finding is that almost no UK productivity growth in retailing comes from entry and exit in the UK while almost all retailing productivity in the US comes from that avenue. Perhaps the Government might consider whether such factors as planning or land use restrictions are holding back enterprise in the UK retailing sector and so holding back productivity growth.
	That more generous view of manufacturing as a chain from conception to customer satisfaction opens up many more opportunities for innovation and enterprise. Innovation is not just new science and new technology but identifying relationships between previously unrelated and diverse matters. That ability to reinvent oneself by using new technologies and discovering new markets is an important part of enterprise. You have to be on the spot to do that. You cannot do it if you are too spread out or have lost control of your core activities. Surely, it is now no longer supportable to differentiate between someone who services a piece of equipment and someone who assembles it. Arguably, the person who services it needs more skill than the assembler and adds more value. Certainly, high volume employment has been lost in manufacturing but the picture is entirely different if we look at the value added by industry through enterprise.
	It seems to me that government must stop considering manufacturing and services separately and start looking at a whole value chain. There is a story going around about a company with an excellent reputation for productivity and service which built a new factory staffed only by a man and a dog. The dog was there to bark for the service engineer when things went wrong and the man was there to look after the dog.
	It is the task of business managers to create wealth. It is their task to imagine the future and to prepare for it or to go out of business. These are very special personal and human activities. They cannot be performed by government but can be encouraged by them. As my noble friend the Minister explained, the Government are giving encouragement by creating stable and healthy economic conditions, careful tax concessions, new technologies from a sound science base and facilitating skills training. However, in the end it is down to the enterprise of business managers to create wealth.
	I should like the Government to change the way that they look at industry and to look at it in the more generous and broader way that I have described. Perhaps then they too will discover more enterprising ways to encourage it.

Lord MacGregor of Pulham Market: My Lords, Brendan Barber, the general secretary of the TUC, said the other day:
	"The precarious state of pensions is one of the most pressing issues facing us all".
	I intend, therefore, to concentrate on pensions and in so doing declare an interest as trustee of a pension fund and a director of Friends Provident, one of our major providers.
	That is a pretty devastating comment by Brendan Barber, given, as my noble friend Lord Higgins said, that in 1997 we were proud to be able to say that we had one of the best provisions for pensions in this country compared with nearly every other European country. There has been a dramatic decline in our position since then. So I am glad that there is a Bill on pensions in this Session. However, the real question is whether it will meet the need and the challenge.
	Why did Brendan Barber make that comment? First, there has been a huge decline in the provision made through occupational pension schemes. Only two or three years ago a trickle of companies were closing their final salary schemes to new entrants. Today there is a flood. Seventy per cent of all the FTSE 100 companies have now closed their final salary defined benefit schemes to new entrants. Less than one-fifth of all employers now offer a final salary scheme to new employees. Over 40 per cent offering a final salary scheme closed it to new members last year.
	Moreover, employers are now having to meet a substantial gap in the funding of most occupational pension schemes—the black hole. They are having to meet the £5 billion gap in cash flow created for them by the Chancellor in his dividend tax credit removal by contributing much more themselves. According to Mercer Human Resources, in the first few months of 2003 companies invested 7.8 per cent of their profits in pension schemes as against 5.1 per cent last year. That will have to increase substantially. We now know of black holes not only in many occupational pension schemes in companies but also among local authorities. One estimate I have seen is of a £15 billion gap for local authorities and many other areas. So there is a very real challenge and threat to occupational pension schemes.
	In the current year—the latest year for which figures are available—average employer contributions into final salary schemes were 13.1 per cent of the total salary bill compared with 11.5 per cent in the previous year. They are expected to rise to 15.1 per cent, as are employee contributions. We are now seeing the demise of final salary schemes, compared with what was a golden age for those who benefited from them and are now in retirement. Defined contribution schemes are not replacing them in the way that one would wish.
	It is significant that for defined contribution schemes the average last year of employers' contributions was 5.2 per cent compared with 13.1 per cent for final salary schemes. Employees contribute much less to defined contribution schemes than they did to final salary schemes. The result is that defined contribution schemes, which actually properly mirror our lifestyles and employment styles these days with people changing jobs so often, are not closing the gap because of those lower contributions. That is my first point.
	My second point is on the poor take-up of stakeholder pensions, which are well below the Government's targets. Indeed, in companies where the employer does not make a contribution, there has been a take-up of only 13 per cent. Moreover, if a substantial proportion of those for whom the Government originally targeted the schemes were to take them up, it would be the biggest mis-selling scandal of all time, dwarfing all previous cases. It would be a government mis-selling scandal, from a Government who are quick to blame others. That is because of the impact of the minimum income guarantee and other pension tax credits. Therefore, it would be mis-selling to suggest to so many of those who were originally targeted that they should take up a stakeholder pension.
	Thirdly, the British public are simply not saving on the scale needed. In the six years to 1997, the savings ratio was never lower than 9.1 per cent and in the six years since it has never been higher than 5.7 per cent.
	Finally, there is the state provision. The Chancellor told this year's Labour Party conference:
	"I want the next Labour Government to achieve what, in 50 years of the welfare state, has never been achieved. The end of means-tests for our elderly people".
	In fact, already 60 per cent of pensioners are on means tests. On present trends and plans that will rise to 73 per cent by 2025. Whatever the Government's good intentions, we have certainly gone seriously and heavily backwards in the past few years.
	What has caused this? We had a debate in this House on 5th March in which many noble Lords referred to some of the factors, so I can deal with the matter very briefly. There is increasing longevity, which has substantially changed the balance between the number of years one spends in work and the years one would expect to retire on pensions gained in work.
	The abolition of the dividend tax credit must be a major factor because already it has meant that £30 billion of cash, which would have been in occupational pension schemes, is not there. I remember well the debates we had in the other place in 1997 when this was introduced by the Chancellor. The Chancellor claimed that it did not matter because increases in the capital of pension funds as a result of the rising equities of the 1990s made it unnecessary to concentrate so much on dividends. That is a very false argument now—as many of us warned would be the case—because of the volatility of equity prices.
	The decline in equity markets is a factor. Another is accountancy changes. My noble friend Lord Higgins referred to FRS 17. There are the contribution holidays that companies took in the 1990s when their pension funds looked in a good state—although many of those contribution holidays arose from Inland Revenue rules because they were over-providing earlier. There is the cultural environment—the emphasis now on mis-selling and the question whether pensions provide a good deal.
	A huge factor is complexity—regulation and its costs. On regulation, if the Government continue with the 1 per cent cap on the costs for selling stakeholder pensions there will simply not be enough people in the market place selling stakeholder pensions. In order for a take up to occur, one needs people to sell them. If the incentive is not there; it simply will not happen.
	There was also the Statement of 11th June, in which the Government announced their proposal that companies closing pension schemes would have to meet the full liabilities or climb ahead. That was well intentioned indeed, but probably a further disincentive to companies to continue with defined benefit schemes. Indeed, one pension specialist, David Ritchie, has said:
	"Government has just decided that the defined benefit is a guarantee payment for the member's entire lifetime as a pensioner".
	Finally, there is the "live for today" mentality. These are the problems we face. How does the Bill referred to in the Queen's Speech measure up? I shall deal very briefly with the pension protection fund because it was covered by my noble friend Lord Higgins and the noble Lord, Lord Newby. Again, that provision is well intentioned but we will need closely to examine the details. In particular—this is called the "moral hazard"—will prudent and well managed schemes be paying for others that may not be, and should there be a government guarantee?
	I was on holiday in the United States in October and happened to come across this extract in USA Today on October 15th. It stated:
	"The Pension Benefit Guaranty Corp.,"—
	that is a reference to the United States' scheme—
	"which insures U.S. pensions, faces a record $8.8 billion deficit and eventually might need a government bailout, its director told a Senate committee".
	That is what has happened there. We need to pay attention to that warning.
	The other reference in the Queen's Speech to the pensions Bill is the need to encourage employers and individuals to take out pensions. There is a fundamental point which we must embrace before we look at whether the proposed measures really add up. We have to say that in the current climate—and with many of the problems I referred to earlier—people must get used to working longer, getting their pensions later and paying more for them in their working years at the expense of some more immediate things.
	Let me turn briefly to a few of the proposals that I think may be required, then we can see whether the Bill measures up to the need. The first matter is getting the balance right between legislation and regulation on the one hand and incentives and the need for personal choice and responsibility, including the principle of caveat emptor. I am sure that we do not have that balance right at the moment.
	Turning to complexity, I must say that I think that the Inland Revenue document is a huge improvement on our present situation. It cuts down eight different pension schemes with a huge raft of regulations into one. But there is a problem on the £1.4 million cap. We will certainly have to examine that closely in the Bill. I have a suspicion that, because of the problems of moving in and out of that £1.4 million limit, this will greatly add to the complexity for many people making pension provision for themselves.
	I have thought all the way through that the right answer to this issue is to remove that £1.4 million cap but to be much less generous than the Government propose on annual contributions. One could halve the £200,000 limit and still enable people to make very good provisions for themselves. That would be a much simpler solution. I agree entirely with my noble friend Lord Higgins that the pension tax credit and the working tax credit—even the baby bonds now—so add to the complexity that it is inevitable that the take up will be small. Micromanagement, which the Chancellor continually emphasises, simply does not work.
	So far as concerns regulation, there is a real problem about cost, not just the cost of dealing with mis-selling and making compensation but regulation as a whole. That cost is met by policy holders and ultimately a reduction in capital for pension schemes. I am alarmed at the recent suggestion in the press that the Financial Services Authority might be suggesting that the simplified stakeholder pensions that the Government are now advocating may run up against the problem of mis-selling. If so, then we can say good-bye to stakeholder pensions. There is a very real threat that the regulations will inhibit entirely the need for more people to take up pensions.
	I shall be very interested to see what the Bill says on incentives. There is no doubt, given the background that I have described, that there is a need to give more incentives both to employers and individuals—that means tax incentives—to take up pensions. There is a whole raft of proposals around; we are awash with different variations of schemes. But certainly there must be something—for example, a pension tax credit to replace the £5 billion that the Chancellor takes away every year from pension funds and which would not require going back to the old ACT scheme. A pension tax credit would be one way of doing that.
	The trouble is that the Chancellor has already introduced and spent the stealth tax. That means that there must be further reduction in tax revenue to meet that requirement, but that will certainly be necessary if we are to have the pension take-up that we need. Another possibility is some variation on or something similar to the American 401k schemes. As I said, there is a raft of proposals. What is clear is that the present incentives are insufficient. If the Bill is to achieve its objective, we require something on those lines.
	I would also remove the disincentive for people to take out annuities—and therefore to take out personal pensions that lead to annuities—of the age 75 barrier, which is becoming increasingly familiar to most people and causing them to wonder whether it is worth taking out a substantial personal pension. Removing that would be a simple measure.
	Also—here I touch on another point mentioned by my noble friend Lord Higgins—we may have to contemplate more generational transfer of funds. That could mean amending the basic state pension—in stages—so that increases are attached to earnings rather than prices. The Conservative Party is now considering an ingenious proposal that would also require the abolition of the cost-ineffective welfare to work schemes to make it reasonably revenue-neutral. But that could be done in stages, starting with older pensioners. We must certainly consider that possibility, because of the problem that people are now living much longer.
	More radically, have the Government done enough to raise expectations about when the retirement age should occur? It will have to be raised, both for state pensions and, further than the Government have provided, for occupational pensions and government employees—people in the public sector. There are various ways to provide extra compulsion or to move to pension provision subject to opting out, rather than simply encouraging people to opt in to occupational pension schemes. I suspect that the pensions commission will be the precursor to some such additional compulsion.
	I do not pretend that any of that will be easy, but I suspect that the Bill, like everything else that the Government have done so far on pensions, will not match up to the challenge. If so, it will be an opportunity missed.

Lord Paul: My Lords, first, I offer my apologies, especially to my noble friend Lord Sainsbury and the noble Lord, Lord Higgins, for not being here for the opening speeches. The congestion charge has solved many problems, but it did not stop the Horse Guards coming out on parade.
	It gives me great pleasure to take part in this important debate. The contributions so far have been impressive and interesting, clearly showing the knowledge of economic and industrial matters that exists in this House. Noble Lords will know of my passion for the manufacturing sector—a sector in which I have been involved all my life. I declare an interest as chairman of Caparo, a manufacturing group, and as a vice president of the Engineering Employers' Federation.
	Before I turn to the main contents of my speech, I shall say a few words about the relationship between industry and government. To achieve sensible and practical legislation, it is important that industry and government work as closely together as possible. Although differences of opinion sometimes arise, it is of paramount importance that the two sides continue to work together for the benefit of UK plc. I am encouraged that the Government have placed so much emphasis on that working relationship and congratulate my right honourable friend the Secretary of State for Trade and Industry.
	I take this opportunity to list three areas where Government can do more to involve the business community. The first is on European Union directives. They tend to involve very technical issues. Timely input from the business community would help the Government to identify areas of concern.
	The second is on regulations. The Government should discover more ways to involve the business community in that important area to provide better regulation—and, indeed, deregulation. The third is in ensuring that the Department of Trade and Industry and its regional bodies have sufficient funds to carry out their tasks and be a strong voice for business at home and abroad.
	Despite the economic problems of the past few years, partly due to the slowdown in economic activity in the USA, the EU and Japan—all major export markets for British manufacturers—UK manufacturing remains strong and vibrant. It accounts for 18 per cent of GDP, 80 per cent of research and development spending and 60 per cent of UK exports. It employs 3.5 million skilled people, with up to 1 million other jobs in the rest of the economy directly linked to manufacturing.
	While the rest of the EU has been struggling economically for the past few years, the UK economy—under the impressive stewardship of my right honourable friend the Chancellor of the Exchequer—remains strong, with low inflation, interest rates and unemployment. That has not come about by luck or chance, it is the product of sensible and well thought out policies advanced by the Chancellor and the Government.
	The Government should also be congratulated on their determination to increase productivity levels. Manufacturing generates faster productivity growth than any other UK sector, averaging increases in output per head more than twice as fast as the rest of the economy during the past two decades. It is presently 25 per cent higher than that in the rest of the economy. The introduction of the research and development tax credit, the Roberts review on the supply of engineers and scientists, the extra funding for science and the forthcoming DTI innovation review and the Treasury Lambert review will help the UK's performance in innovation and, ultimately, in productivity.
	However, the Government can and should do more about investment. Decades of under-investment are a key cause of the productivity gap. With so much of UK investment linked to internal finance, we are in a vicious circle from which it is hard to break free when margins are so low. I remain slightly concerned that the Government have yet to grasp the extent of the decline that we have experienced.
	Investment incentives must increase. I know that creating new jobs is important, but retaining manufacturing jobs should be considered even more important. Investment is a complicated policy area, but I draw noble Lords' attention to the analysis conducted by the EEF in its pre-Budget submission and its call for an investment tax credit.
	There are two other areas in which I should like the Government to take urgent action. The first is pensions, about which we have already heard; the second is employers' liability insurance.
	On pensions, I congratulate the Government on the publication of their Bill, which I am sure will be scrutinised thoroughly in this House. I am delighted by the announcement of the setting up of a pension protection fund.
	A growing number of manufacturing companies with defined benefit occupational pension schemes now face increased costs in providing them. Although the Government have no influence over some reasons for that, such as demographics and a weak stock market, they can provide assistance in other areas and must avoid imposing additional costs or burdens on hard-pressed occupational pension schemes.
	I urge the Government to publish at the earliest opportunity a clear timetable for the replacement of the minimum funding requirement, to respond quickly and positively to the Pickering report simplification principles, and, separately, to adopt a bold approach to the long-awaited review of Inland Revenue rules.

Lord Higgins: My Lords, I am grateful to the noble Lord for giving way. He says that he favours a pensions Bill but is against the imposition of any increased cost on business. Will not the pensions Bill increase costs on those with final salary schemes?

Lord Paul: My Lords, we will have to scrutinise the pensions Bill before we decide that. The Bill is a step in the right direction, but it must be scrutinised. Businesses cannot afford further costs.
	The issue of employers' liability insurance has been raised in this House on numerous occasions. A range of cyclical and longer-term factors has pushed up the cost of the different forms of insurance taken out by manufacturers, by 50 to 60 per cent. Some manufacturers face premiums hikes of more than 100 per cent, while others experience significant problems in obtaining employers' liability insurance. The Department for Work and Pensions is carrying out a review of that, but I urge the Government to publish their conclusions at the earliest opportunity.
	Industry acknowledges that the main responsibility for its success rests with itself. No one in industry expects to be treated as a special case; however, as developing countries become more prosperous, there will be further significant opportunities for manufacturers to sell goods, earn revenues from related services and recruit new skilled people. However, only companies that raise their game in the key areas of productivity, skills and innovation will be positioned to exploit fresh opportunities. In Britain, there are some great companies capable of doing that.

Lord Freeman: My Lords, I shall not detain noble Lords too long, as I wish to concentrate on other issues. I listened with great interest to what the noble Lord, Lord Sainsbury, said about the science base. I pay tribute, not only to the noble Lord, but to his department, for their work to encourage more state and private investment. There are three issues that the noble Lord did not cover—perhaps he might cover them in writing or in his winding-up speech.
	No reference was made to the timing of the White Paper on innovation, which was promised by late summer or early autumn. I assume that its publication will now be synchronised with the report of Mr Lambert on the relationship between industry and universities. However, it would help noble Lords to know the timing.
	My next point relates to the intriguing consultation paper issued by the Treasury and the Department of Trade and Industry on the creation of funds based upon the American Small Business Investment Corporation (SBIC) model to encourage the flow of more money into the development, in particular, of high-technology growth funds. Is there any prospect of the Chancellor of the Exchequer, in the Statement that he may make on 10th December in another place, reporting further progress on that consultation paper?
	When the Audit Commission recently reviewed the relationship between the noble Lord's department and the regional development agencies, there was justified criticism of the amount of regulation, control and reporting that RDAs must make to the Department of Trade and Industry. We must make that relationship more efficient.
	I welcome the text on pensions in the gracious Speech. The text, which no doubt was carefully crafted, states:
	"Legislation will be introduced to encourage both employers to provide good-quality pensions and individuals to save more effectively for their retirement".—[Official Report, 26/11/03; col. 2.]
	I agree with my noble friends Lord Higgins and Lord MacGregor of Pulham Market that it is doubtful whether those noble and welcome aspirations will be met.
	I declare an interest as a trustee of an industrial pension scheme; however, the views that I shall express are my own. I do not wish to repeat the excellent remarks of my noble friend Lord MacGregor. One advantage of speaking after the noble Lord is that he puts his points with such clarity and force that it inevitably saves time, as one does not have to repeat them. There is great irony in the noble Lord's position, as he served with great distinction as chairman of the House of Commons pension fund. As it is a public sector final salary scheme, it is in no danger of being wound up. There is a dichotomy between the conditions of public sector final salary schemes, funded by the taxpayer, and the final salary defined benefit schemes in industry. The noble Lord, Lord MacGregor, speaks with great authority given his present position in the City.
	Before my detailed points, I wish to make one general point that has not been covered: we must now face the need for everyone to work longer. In a decade, the conventional retirement age in the Civil Service of 60, and in industry of 65, will be a thing of the past. We shall have to work longer. Not only are we healthier and living longer, but we will have to work, not only to pay our own pensions, but to continue contributions for those who follow us. After all, by 2020, half the adult population will be over 50. We are an ageing population and must take practical steps to deal with the actuarial implications of that.
	The noble Lord, Lord Paul, in a very clear speech, referred to the minimum funding requirement rule. He was right to do so, because in Conservative administrations in previous Parliaments, the MFR was introduced, inevitably, following pension fund problems. The problem with MFR is that it is a theoretical calculation and is inflexible. The Government have said that they wish to move to scheme-specific minimum funding requirements. I find that baffling; I do not know how they will be calculated scheme by scheme. Who has responsibility: trustees or employers? We should say good-bye to the minimum funding requirement. The Government intend to introduce other measures, including the company pension protection fund, which may obviate the need to maintain the MFR.
	The draft winding-up regulations—an interim measure to ensure an equitable distribution of money in the event of an employer's insolvency—were published in October. They are very sensible and to be welcomed. However, in my experience, the regulations are proving impractical, as they require access to detailed records about a person's employment history and contributions to schemes, in some cases dating back 50 years. Those details are simply not available, and we might have to revisit how the regulations work by 2004, if they are to come into effect then.
	I now turn briefly to the company pension protection fund, which should be welcomed. However, as several of your Lordships have already said—the noble Lord, Lord Newby, in particular, the noble Lord, Lord MacGregor, and my noble friend Lord Higgins—there are more stakeholders involved in this fund than simply the employer and therefore the contributor to or guarantor of the defined benefit scheme. For example, the stakeholders should all contribute to the cost. Otherwise we will end up putting the noble Lord, Lord Paul, in a very difficult position. If his companies end up having to pay an extra 1 per cent of their payroll, he will not be happy and I suspect that his shareholders will not be happy either.
	The other stakeholders surely include the taxpayer, as has been mentioned. After all, what the Government seek to do, which is laudable, is to protect those who fall on hard times or have fallen on hard times in the past whose pensions disappear and who have to rely on the state. The employer and employees in public sector schemes should also contribute, although they will not necessarily be beneficiaries for obvious reasons. They have a responsibility, as indeed do employees past and present in individual defined benefit schemes.
	I make one request to the Minister—may we please have the draft regulations, which will be very important for this Bill, at Second Reading? Too often, we have received the draft regulations in the latter stages of the Bill. In this particular case, the regulations will be as important as the principal of the Bill. I agree with my noble friend Lord MacGregor that, in a decade's time, hardly any new employees coming into work in the private sector will be able to join a final salary defined benefit scheme. It will be a thing of the past. Those employees will then have to move to defined contribution schemes, which brings me to my penultimate point.
	A defined contribution scheme is one in which the risk is passed from the employer to the employee. In other words, the employer will match the contribution, perhaps at a much lower rate and lower share of the total cost—as my noble friend Lord MacGregor said—than in defined benefit schemes. The employee will have the responsibility of deciding how his and his employer's money should be invested.
	An investment in equities is more risky, as we have seen over the past two or three years. Therefore, it is very important that the advice, which can sometimes be expensive, is available to those employees. I am glad that the Financial Services Authority is reviewing the degree of regulation that will be needed for the new Sandler products—the new savings products that will be available for those on average or lower incomes. I strongly believe that the 1 per cent cap should be replaced with a much more flexible approach; perhaps a lower cap for straightforward schemes investing in gilts or cash, but a higher rate of cap for the more risky schemes, especially equity-based schemes.
	I conclude by looking forward with great anticipation to what the Labour Party plans to publish tomorrow, which, I gather, will be called Prospectus. The Prime Minister is reported as having said that one of the issues in this document for discussion within the Labour Party and, indeed, within the country, is that of compulsory pension contributions by employees. I welcome that debate, because I do not share the view of some of my colleagues on these Benches that compulsion should never be contemplated. We are rapidly approaching the point at which—leaving aside the second state pension—a certain proportion of one's income, whether high or low, must be set aside for one's future pension. In the mean time, employers should be encouraged—and legislation should permit them—to assume that all their employees will remain in the company pension scheme but have the right to opt out. At the moment, it is very much the reverse—employers try to attract membership of their schemes. We should go a bit further and allow employers to assume that everyone will be part of their pension schemes.
	I conclude by making a plea to the Treasury. When considering whether to codify the recommendations of the Myners report on the operation of pensions funds and the responsibility of trustees, the Treasury should cool it and go for a code rather than enshrine in statute law the responsibilities of trustees for training and for the consideration of the alternative investments that they might wish to put in their pension scheme. A lot has been achieved so far and we do not need to go down a statutory route. I look forward to the pensions Bill and participating in those debates.

Lord Tomlinson: My Lords, at the outset, I make it clear that I am fully in support of the main economic thrust of the Queen's Speech. The first sentence is:
	"My Government will maintain their key commitment to economic stability and growth".—[Official Report, 26/11/03; col: 1.]
	It is hard not to be in favour of that. It rather reminded me of the sort of things that I used to promise Father Christmas—how good I had been and how I therefore deserved all the presents that I was going to get. The sentence is clear and noble as an objective and I was looking forward to hearing a little bit more detail in the Queen's Speech about what we would do in pursuit of that goal. I listened to the end without hearing a great deal about either that or industrial policy.
	I speak as someone who is supportive of the goal. However, it is important for supporters of the Government to express in a supportively questioning rather than stridently critical way some of their concerns about the possible obstacles that may lie in the path towards the promised land of continuing economic stability and growth. Of course, as my noble friend said—and anybody who is at all objective about these matters would immediately want to pay tribute to this—there are continuing good omens. Continuing low unemployment, low inflation, low interest rates and, alongside them, welcome signs of the upturn in economic growth, are all good omens, not only in the United Kingdom. They are now beginning to appear in the eurozone and, importantly, the United States of America.
	Against that background, however, we should also express our concerns. Concerns are beginning to worry not only Members opposite, but some noble Lords on all sides of the House. The continuing growth in the borrowing requirement competes for money and produces an upward pressure on interest rates, which will have a knock-on effect on consumer confidence, investment and business costs. It will create an underlying need to raise more money from taxation, either from the dynamics of growth or, if that growth is not fully adequate, from new forms of taxation. The continuing demand for borrowing must be a continuing worry.
	My worries, which are not necessarily shared by all Members of your Lordships' House, are compounded by the reaction of the finance Ministers of the EU countries in driving a coach and horses through the stability and growth pact. That pact uses the same two words as the key economic commitment of the Government—stability and economic growth. Yet, at one fell swoop, in a decision that was ill-argued and unjustified, they have broken something that was given the authority of European law by driving that coach and horses through it. To give President Chirac and Chancellor Schroder a polite slap on the wrist is not an adequate response to a threat that is not purely a domestic threat in France and Germany, but one that has a knock-on effect on economic performance throughout the whole of Europe.
	The failure at Cancun is another factor that does not augur well for the necessary developments in liberalised world trade. That link between the liberalisation of world trade and our own economic growth is an unbreakable link: they are interdependent facts.
	In his interesting opening speech, my noble friend Lord Sainsbury referred to another economic worry; namely, the poor record of this country in relation to productivity. As someone who usually has a boring reading list, I was reading the minutes of the last meeting of the Monetary Policy Committee, in which there is a very worrying statement. Paragraph 9 states:
	"With low population growth, output and demand growth might average only 2% per annum, or possibly less, if productivity growth in recent years represented the underlying trend".
	That is a very polite way of expressing a worry that is there for us all.
	Everyone talks every year about the productivity crisis. I cannot find a decade since the end of the Second World War when productivity has not been the fundamental issue that had to be addressed. We talked about it while the British shipbuilding industry disappeared; we talked about it through the collapse of our steel industry; and we talked about it with regard to the motor cycle and the motor vehicle industries. Then we start to pretend to ourselves that perhaps the manufacturing industry is not as important as, historically, we have pretended it to be. In that respect, I am not sure that I fully agree with my noble friend.
	I agree with much of what my noble friend Lord Haskel said, but the strength of his language in relation to manufacturing industry is not one that I share. As my noble friend Lord Paul said, the manufacturing industry is an important part of our economy and it must continue. The need for a national effort involving all stakeholders being able to identify first, the obstacles to productivity improvement, and, secondly, the means to overcome those obstacles, is as imperative to this country now as it was when we created the National Productivity Council. I think that everyone can remember its existence but can find little to signify the hallmarks of its achievements, but those achievements now must become a reality. In doing that, we must cease our obsession with pay and its restraints and replace it with a commitment to a high reward for a reduced unit cost of labour in the manufacturing sector.
	In this debate, I do not intend to stray far into the issue of education, except to say that I am not obsessed either for or against the target of 50 per cent of young people going on to higher education. My concern is what we train them to do. What are the skills in which we offer the training? They must relate to our industrial needs so that we have a continuing supply of labour trained in the relevant skills necessary to our economic performance.
	This country does not benefit from large numbers of unemployed media studies graduates looking for jobs for which they have been given high expectations, but who subsequently find that such jobs do not exist. Nor does this country benefit greatly from an increased supply of marketing graduates who suddenly find that they have nothing to market because of our poor productivity. I am not obsessed with increasing numbers of students going into higher education through the front door. But, increasingly, in some faculties of some universities, as many as 40 per cent are leaving through the back door without graduating. That is not a necessary and useful contribution to our industrial productivity.
	I now turn briefly to the euro. The 7th Report of the Euro Preparations Committee indicates that preparations are going extremely well. At the start of the document, I read with great interest the Chancellor's commitment, in principle, subject to the five economic tests, to our joining the euro. Those good and serious reports need to be disseminated a little further than wise people talking among themselves. There can be as many caveats as are thought to be necessary. But if, in principle, we are committed to joining the euro, it is incumbent on the Government to spell out more regularly, more frequently and more consistently the perceived economic benefits that lead them to the conclusion that joining the euro is good, in principle.
	I do not want any caveats—I shall not introduce any myself—that question the five economic tests. Let them stay; let them be there. It is on the basis only of their being achieved that the Government propose to bring the matter to Parliament and, subject to the agreement of Parliament, to take it to the country. Therefore, I welcome the paving Bill. In the meanwhile, between the promise and the performance, we should inform people of the benefits. In no way does that interfere with or limit the commitment of the Government to the five economic tests. The Government should therefore be less shy of spelling out the benefits.
	The Government's economic record as a whole is good. The country needs its future economic performance to match its past economic performance. As my noble friend Lord Sainsbury said, to do so we must have guaranteed energy supplies. I did not intend to refer to the matter, but, as he opened his speech with a reference to energy supplies, I merely emphasise again—as I and other Members of your Lordships' House have in the recent past—that, while I welcome the commitment to renewable energies, such renewables must be in place producing sustainably as an essential precondition of phasing out any power stations, however fuelled, whether they be nuclear, coal or gas-fired. The security of our energy supplies is the sine qua non of our economic stability and growth.
	I wish the Government well in their goals of economic stability and growth. At present, I remain concerned, rather than critical, about the possible pitfalls in the path ahead. I hope that next year we shall see an increased and improved performance on the essential issues of keeping our borrowing within manageable control, without threatening interest rates or investment, and being able to achieve economic growth without threatening employment, interest rates or tax, while, at the same time, being able to put in step some permanent measures to help improve our national productivity.

Baroness O'Cathain: My Lords, there were several points of interest to industry in the gracious Speech. In his brilliant speech, the noble Lord, Lord Tomlinson, quoted the opening phrase from the gracious Speech, which stated:
	"My Government will maintain their key commitment to economic stability and growth".—[Official Report, 26/11/03; col. 1.]
	That is very welcome. It is a fact that industry and the economy are utterly reliant on each other, but it would have been good to see some acknowledgement of this reliance for economic stability and strong growth. As the noble Lord, Lord Tomlinson, and others have said, industry—particularly manufacturing industry—needs all the encouragement that it can get and reassurance that it is not an "also ran" in the Government's great scheme of things. We should never forget that without the wealth creation of industry, the social and other policies of the Government would be in a parlous financial—and, indeed, every other—condition.
	I was heartened, albeit momentarily, when I heard the phrase,
	"My Government will also introduce legislation on energy matters".
	But my feeling of well-being dissipated rapidly when the sentence continued,
	"to establish a Nuclear Decommissioning Authority".
	The noble Lord, Lord Sainsbury, in his opening speech told us that the new authority will deal with waste. No reference was made by the Minister to the need to establish a body or to engage in a study to consider building new nuclear power stations. To be fair, the quotation from the gracious Speech continues with the words,
	"and to promote secure, sustainable supplies and a safer environment".—[Official Report, 26/11/03; col. 3.]
	But, again, no specific mention is made of nuclear generation. I support absolutely the closing remarks of the speech made by the noble Lord, Lord Tomlinson, that nothing should be done without a secure plan in place.
	In simple terms, the two serious requirements concerning the long-term future of energy supplies in this country are: first, the need to fulfil international commitments to increase the percentage of electricity generated from renewable sources; and, secondly, the need to safeguard the long-term security of supply. Perhaps we should not read too much into the juxtaposition of words in the Queen's Speech. Perhaps I am suffering from having heard too many non-answers to Questions put in this House about the long-term security of energy supplies, but to be promised an energy Bill that is to concentrate on decommissioning waste, with no further reference to existing nuclear plants, does not make me confident about the long-term security of energy supplies.
	We cannot allow ourselves to drift into a situation where, some 10 years down the line, we find that there is an unacceptable reliance on gas imports from parts of the world where long-term political stability could be seen to be somewhat hazardous. In addition, the practical problems associated with being at the end of the long trans-European pipeline, which could be vulnerable to political or terrorist action, cannot be ignored.
	Putting the two requirements I have already mentioned into the context of this debate on the gracious Speech, there is one sector of industry on which the economy relies more than any other; that is, energy. For far too long, short-termism has predominated in our attitude to energy. For two centuries, we have been extremely fortunate to have had coal as the foundation of our industrial progress, but that is no longer the case as environmental considerations, quite rightly, have become so important.
	We have been fortunate in some development of hydro, but not any longer as it is not acceptable to site large man-made lakes and hydro-electric power stations close to centres of population. Not only are we a densely populated island but also, unlike the Norwegians, the Canadians and the Swiss, we have no mountains covered with snow producing cascades of water capable of rushing through turbines to generate electricity. Indeed, water is such a scarce commodity in parts of the United Kingdom—as noble Lords would have heard me remark during our deliberations on the Water Bill—that we have to conserve it for use other than in electricity generation.
	The current concentration on renewables is a positive reaction to the almost universal awareness that the world has to reduce carbon dioxide emissions, commonly known as "greenhouse gases". It is imperative that the emphasis in electricity generation is focused on all low and non-carbon energy sources.
	An article in the "Business" section of The Times for 30th October highlighted the fact that some 13 so-called "dirty coal power stations" are "facing the axe", which will result in the United Kingdom facing widespread blackouts within the next four years. Those 13 dirty coal power stations currently account for 31.5 per cent of supply, while "clean coal" power stations account for only 10.8 per cent. In the same article, the chief executive of Scottish Power forecast that electricity shortages of the kind that hit California in 2000 could become a regular occurrence. Even more recently, we are mindful of the power cuts closer to home in London and Birmingham, in Italy in continental Europe, and in Denmark in Scandinavia.
	Faced with those facts, no one can ignore the necessity to focus firmly and quickly on the development of renewables. The term "renewables" is defined in the energy White Paper as,
	"generated from wind power, wave, tidal, solar photovoltaics (PV), hydro generation, geothermal and biomass (energy from forestry or crops)".
	The list is justified on the basis that,
	"they all produce no carbon at all or, in the case of biomass, produce only the carbon they have already absorbed from the atmosphere when growing".
	We need to look behind those statements. But, in doing so, we find that all is not exactly as it may seem. Continuity of supply cannot be guaranteed by wind because it is probably only 35 per cent efficient. It may seem hard to believe, but we do not have a great deal of wind in this country. The manufacture of photovoltaics involves the use of certain very noxious chemicals, so they are not exactly squeaky-clean. Justifying biomass does not remove the fact that noxious gases will be released.
	The category of renewables does not include nuclear energy, although it does not emit any noxious gases and is the second cleanest energy source following wind. For some reason, nuclear energy is placed in the category of fossil fuels and is thus penalised by being made unfairly subject to the climate change levy. I suggest that there should be a redefinition of "renewables" to include nuclear energy. I do not seek to be wildly original in making that suggestion, because I am conscious of the example of the Government of Ontario in Canada.
	The Government of Ontario have recently extended the tax concessions available to renewables to nuclear power in recognition of the point I have just made—its very low environmental effects. That tax concession was brought in only last year to encourage more power generation from clean sources, in particular wind and hydro, but now the Government of Ontario recognise that nuclear power needs to be included. They are thinking of the long term. They do not want to face a complete blackout in 2020. Will the Minister acknowledge this fact and say whether, in the interests, first, of reducing greenhouse gas emissions and, secondly, of encouraging nuclear development for continuity of supply, the Government would consider matching the action taken in Ontario?
	So far, the Government have steadfastly refused to make any commitment to nuclear energy supply. The only commitment appears to be to the establishment of a nuclear decommissioning authority, the very title of which will probably lead people to think that it will be tasked with removing all nuclear activity in the United Kingdom. What we need is a "nuclear commissioning authority".
	If that is a step too far, bearing in mind that the time-scale for the commissioning and building of new nuclear power stations is at least four or five times the life of a normal Parliament—I have to say that politicians are notorious for looking only to the next election—the energy industry will become increasingly reliant on imported gas. Both existing nuclear power stations and retired coal-fired stations will come to the end of their lives within the time-scale of those four or five Parliaments. Both sources will have to be replaced by imported gas. Recent estimates suggest that, by 2020, some 68 to 75 per cent of all electricity generating capacity will be supplied by gas, with between 70 and 90 per cent of that gas being imported. Do we have any right to subject this country to that? The answer, I am sure, is no.
	Above all, we need to keep the nuclear option open and undertake an in-depth study of what part nuclear could and should play in our future. Keeping that option open requires the recognition of nuclear's carbon-free qualities in the market through an emissions trading scheme. It also requires an urgent resolution of the waste issue. However, technical solutions are available and are being implemented by other countries such as Finland. Is the Minister prepared to advocate political impetus behind those solutions?
	The noble Lord, Lord Sainsbury, did make a commitment to assisting in the retention of an indigenous nuclear skills base. Some two weeks ago he told the House that £5 million has been set aside for that purpose. However, as I recall, that is £5 million spread over four years. Is that anything other than a sop?
	New and cheaper nuclear power stations with passively safe features and lower waste production are available. New nuclear power stations are under construction in nine other countries. Other countries are backing the low carbon energy economy model with nuclear and renewable sources contributing together as part of a balanced energy mix. Why do we think that those countries are wrong? If we do not think that they are wrong, why are we not considering a similar move? Is this simply a proposal filed in the "all too difficult" basket or, even worse, is it in the file labelled "probably not within our term of government—leave to others"?
	The economy and industry will not be thankful for the results of such inaction, and neither will anyone coping with a future marked by increasingly frequent power cuts like those occasionally experienced in the third world. As has been pointed out, we have one of the strongest economies and one of the better industrial bases in the world. We have to be sure that we do not, by inaction or ostrich-like behaviour, put all that at risk.

Lord Sheldon: My Lords, the noble Baroness, Lady O'Cathain, referred to the weakness of development in manufacturing industry. I agree with her entirely, as, indeed, I do with my noble friends Lord Paul and Lord Tomlinson. Despite all the Government's actions, the competitive position of manufacturing industry is not increasing in the way that it should.
	I want mainly to speak about one aspect of economic policy which nowadays does not form so prominent a part of the parliamentary debate—that is, the balance of payments. When I entered Parliament in 1964, this was the most important of economic issues. No Minister was allowed even to mention the word "devaluation". George Brown, a devaluationist, used to pass me in the Lobby with his fingers shaped in the form of a "D" and he would put his fingers to his lips and say "Sh". He was arguing for it to no avail. Devaluation was indeed then the only way to seek relief from the constriction of our balance of payments position at that time.
	Throughout the 1950s and the 1960s until the floating of the pound, the balance of payments was a dominant economic issue. Certainly the floating of the pound removed the balance of payments as such a dominant economic issue, although, of course, its importance continued. What has happened since then is that our trade balance has become negative as manufacturing exports have declined substantially and imports have increased. Our long tradition—right from Elizabethan times and even before then—as a country with a consistent trading balance, which had endured for five centuries, came to an end a few years ago.
	So, although the floating of sterling allowed us a relaxed view of the balance of payments, the discipline of fixed exchange rates has now gone. Gone also is the determination to bring our accounts into balance. New found is our convenience and our ease. This is not to mourn or even regret the new market conditions, but some recognition must be taken of the consequences.
	Let us examine what has happened in the past four years for which we have the figures. The United Kingdom trade balance for 1998 was minus £8 billion; for 2002, it was minus £31 billion. This is not a temporary blip—even if it were, it would be an enormous one—and the indications are that it is likely to continue and possibly even get worse.
	The problem for our country is that developing countries are becoming more and more sophisticated in their manufacturing techniques—an issue to which the noble Lord, Lord Tomlinson, referred. They are aided, quite rightly, by western industries. With their lower wages and overheads, they are able to produce articles, some of which are nearly as good as, some are equal to and some are better than those produced by the traditional industries of our country. We need only to look at the motor-cars from South Korea and Malaysia, the new electronic products from the Far East and the vast range of products now coming from China, which has accumulated an enormous balance of payments surplus, particularly with the United States.
	The industrial revolution which we created more than 200 years ago has run its course. We led the way and other countries have taken over much of what we thought was inalienably ours. I remember the comments of an earlier generation who thought that the industrial skills and manufacturing techniques we had invented could never be taken over by other countries because the skills we had would always give us the advantage. Coming from Manchester, our textile spinning and weaving, bleaching and dyeing was thought to be superior to anything that was or could be produced in the world and our skills were such that they could not be imitated. But there are now large ranges of textiles which are not produced at all in Lancashire. This process, from which my own area was the first to suffer, has spread through many industries and parts of the country. We would be very optimistic if we thought that this process was coming to an end.
	On Tuesday, the Office for National Statistics indicated that business investment fell 1.6 per cent in the third quarter of this year and manufacturing investment fell by 5.8 per cent. So there is little sign of a balance of payments turn-round coming from investment. In fact, with the pressure for declining tariffs, which even now still operate against friendly, even Commonwealth, countries, such tariffs must decline further at the same time as the spread of skills continues. If the position is largely as I have set out, we must consider what we should do to retain our prominence among the economies of the world.
	Throughout my parliamentary life I have argued for a competitive pound. This would be of some assistance in limiting the adverse nature of the trade balance. But, by itself, it was never enough. Its role was to provide a breathing space within which longer term issues could not only be addressed but implemented. Chief among these were education, training, industrial training and investment. These are long-term aims, but slowing the decline through a more competitive pound could have allowed these long-term aims to be implemented and their consequences to take effect.
	Forty years ago there was plenty of time to achieve these aims if they had been determinedly and vigorously pursued. The great tragedy is that they were not. So even our peculiarly successful and traditionally British company—Rolls-Royce—is now a German company. The decline in British manufacturing was referred to by the noble Baroness, Lady O'Cathain, and others.
	German exports are now greater than those of the United States. The United States—the industrial giant of the world—is now second in its overseas trade to Germany. Astonishing as that may seem now, 10, 20 or 30 years ago it would have been considered quite inconceivable. At the same time, and not by coincidence, the United States balance of payments has continued to deteriorate, with its overseas debt now at 3 trillion US dollars.
	"Trillion" is a word with which we are having to become acquainted. More than 40 years ago the Economist decided that the word "billion", which used to be a million million since at least the 17th century, would in future be defined as a thousand million. Single-handedly the Economist changed the numerical language of our country. The thought occurs that if the "trillion" was thought to be becoming part of our numerical currency, the argument for change then would have been rather less. Perhaps in another 40 years we may see the next step—the use of the word "quadrillion".
	We may be under-estimating the amount of work required to get the external deficits of Britain and the United States into balance. It may need much more effort than previously considered. While Britain had a world reserve currency there was always the opportunity, despite foreign exchange restrictions, to move capital from Britain to the United States. That was always a possibility. It was the seesawing of deficits that made Britain so susceptible to currency crises. Today there is only one primary reserve currency. As a result, the United States economy has incurred prodigious world debts. Sooner or later there must be some attempt to rectify that position. Its increasing debt position will not go on for ever.
	To do that may be much more difficult than many people assume. The industrial and economic changes required, even with a depreciation of the dollar, may be much harder and take longer than people imagine, for this is the first time in the economic history of the world that one country has been entrusted with so much money from so many countries and organisations. In the light of this, the eventual exit will be hard to predict. What one must surely press for is restraint in allowing further progress in this direction. The noble Lord, Lord Sainsbury, avoided deflation, which occurred with so many countries, and we respect that. Clearly, currency levels do not reflect the present underlying competitiveness of the economies. That is a question which at some early date will need to be addressed with even more urgency than shown so far.
	I shall mention one further matter. There is to be a change at the Treasury in that the Inland Revenue and Customs and Excise are to be located in the same part of the building. That is a very interesting development. They come from quite different traditions and there is going to be immense difficulty in merging them. One dates back to 1275 and the other to the 17th century or even earlier. To bring these two traditions together is going to be immensely difficult. They are being brought together in the same building. They will at least be able to talk to each other and perhaps produce some kind of result which may be favourable to the economy as a whole.

Lord Haskel: My Lords, before my noble friend sits down, perhaps I may say to him that he should not be so depressed about the textile industry in and around Manchester because the industry there has reinvented itself. It has a whole range of new products which have medical and construction uses. It is one of the centres of Europe. The industry there has reinvented itself through enterprise.

Lord Sheldon: My Lords, that may be as regards certain products. I have a very close involvement in the textile industry and, generally speaking, not many people will confirm what my noble friend has said.

Lord Patten: My Lords, I believe that merging the Inland Revenue with HM Customs and Excise to which the noble Lord, Lord Sheldon, referred may be just as difficult and challenging a job as merging new Labour and old Labour. Having said that, I say in an entirely bipartisan way that I sit at the feet of the noble Lord, Lord Sheldon, as regards matters such as the balance of payments. I always greatly enjoy what he has to say. I only wish that I had also had the experience of knowing George Brown. It is one of my great personal regrets in life that I never met him in the Bishops' Bar.
	I wish to concentrate my remarks on two themes related to two of the Bills in the gracious Speech, company law and energy. They are areas in which I have both experience and various personal interests to declare, as your Lordships may know.
	Turning first to the measures that we may see as regards company law and auditing practice matters, I support the tenor of the proposals in the Queen's Speech, subject to what the Bill says. If these measures help to stop some of the bad practices that exist, that is a good in itself. There have been, and are, some striking examples of executives taking large sums of money without proper authority from their publicly owned companies, especially in the United States of America where, thanks to the joint efforts of both regulatory authorities like the SEC, auditors and shareholders, clear examples of corporate theft have been revealed. Whether or not criminal charges are brought in every case; whether or not they are successful in every case in the USA or in the United Kingdom, where happily, examples are mercifully fewer, these are abhorrent acts which are ethically reprehensible. Investors, whether they are individuals or institutions investing in their turn on the part of pensioners, do need the protection that the Government seem to be providing. I welcome what we may see.
	Having said that, there is a qualification. I believe that new legislation and new regulation should recognise, and not unduly fetter, the benefits of free enterprise, free trade and capitalism in this country. I do not wish to preach sermons on this matter: there are Bishops aplenty here to do that. But I believe that capitalism, when morally and ethically conducted as it usually is in the United Kingdom, is a great force for good. It is morally enhancing and it is also likely to lead just as much to spiritual as to material improvement. Perhaps I might seek the guidance of the right reverend Prelate the Bishop of Hereford in his valedictory remarks to your Lordships' House after lunch. I have always listened with great care to what he had to say. Indeed, outside the Chamber he once offered to hear my confession, which I did not take up for fear of shocking the right reverend Prelate. I look forward to hearing his views.
	Ultimately, whether people thieve from their companies depends on individual choice. No regulation or legislation is going to stop that completely. I am sure that the right reverend Prelate and his colleagues will recognise that theft and malfeasance exist in other areas of public life. It exists in the Church, in the social services and education. Wherever it happens it is lamentable. But while regulation and legislation are critically important, so also are ethical training and standards, as much in corporate life as in the life of the House of Bishops or elsewhere.
	I now turn to energy. I am going to be less welcoming. The DTI's Bill seeks, for example, to include special administration regimes for power companies facing insolvency. It misses the big issues and the big picture completely. I say with respect that it is a classic example of the DTI yet again being not just asleep on the job but positively hibernating.
	I do not know quite what the seven Ministers in the DTI and all their civil servants do all day. It is rather like the child who pointed at Lord Randolph Churchill when he was campaigning and said, "Dearest Mama, pray tell me what is that man for?". I am not quite sure what the DTI is for.
	A few years ago we had a Department of Energy and a Secretary of State to look after energy supplies, which were points referred to by the noble Lord, Lord Tomlinson, with whom I agreed, and by my noble friend Lady O'Cathain, with whom I also agreed. There are seven DTI Ministers labouring away, and within that department energy responsibility is handled by not even an energy Minister, but by one part-timer, Mr Timms.
	I believe that this indolence is reflected in the promised Bill. It flies in the face of the fact that energy is going to be a make or break issue in the next five years as my noble friend said earlier in her most striking speech. It is because in the three years 2005 to 2008 I judge that there will be serious and quantifiable risks of energy failures in cold spells in this country. We are at risk of the Californian experience in the United Kingdom.
	I carefully steer clear of the use of the word "crisis", and I do that for charitable reasons. It is a word often misused by lobbyists and the media alike. The crisis word, when used, gets automatic and mindless coverage on those morning broadcasts. Some wretched junior Minister is called to account before dawn to reply to the crisis allegation and is then subjected to one of those interviewers suffering from what I regard as a new and developing health scare, a repetitive questioning syndrome, barracking the poor Minister before he or she has even had a chance to begin to answer in the style of yob broadcasting which the BBC in particular is making its very own.
	So I shall not use the word "crisis", but the word "risk". The risk is that there will be serious pressure on gas supplies in particular between 2005 and 2008. Our use of gas is growing at 4 per cent a year yet our UK production will begin to decline from 2005. There is a yawning gap afterwards. Unfortunately, it will not be before 2007 or 2008 that we shall have new, liquified natural gas terminals or, more importantly, the vital new pipeline coming from Norway to which my noble friend referred earlier in her speech. The Government are obfuscating on the matter.
	There is a lot of talk about other sources, particularly Algeria and Russia. Algerian gas is largely spoken for in the Mediterranean region. Russia's pipelines come through many countries. We are at the end of the supply chain and, in a hard winter, it will stop off in France or Germany before it gets here. In Russia, I am advised by those who know the territory, market confidence among suppliers has been severely dented by the imprisonment without charges, let alone trial, of Mikhail Khodorkovsky—do not worry, Hansard, you will have my spelling later—by Mr Blair's friend, Mr Putin. That has knocked producer confidence substantially in Russia.
	What is the DTI doing? Too little. Its recent White Paper barely touched the critical gas issue. Worthy ends such as more energy efficiency, which I wholly support, are not going to keep the lights on in 2006 or 2007. We desperately need, as soon as possible, gas from the Norwegian Ormen Lange field by the new pipeline, yet the DTI is allowing the treaty negotiations that would make that happen to drag on and on. Negotiations could be completed within the month, by Christmas, but I am advised that they will not be completed, because the DTI is totally becalmed on the issue and is not driving the necessary treaty. We can add to that the perverse disincentive that the Chancellor, who specialises in such things, has placed on gas producers with an extra 10 per cent tax rise. That diminishes the opportunity for profitable production. It is no surprise that more and more of our gas assets in the North Sea are being left idle.
	The DTI, with its part-time junior energy Minister, is—and I choose my words carefully—sleepwalking the United Kingdom into a potential power supply black hole in the period between our own production beginning to fail in 2005 and when we get the first Norwegian gas—which will probably, thanks to the DTI, be no earlier than 2008.
	In conclusion, what can ride to the rescue—nuclear or renewables? Unusually, like my noble friend Lady O'Cathain, I support both of those. They are both extremely valuable in any balanced energy policy. Nuclear is running down, however. The Government have abrogated their responsibilities—a point made by their own supporter, the noble Lord, Lord Tomlinson. We need a positive nuclear policy, not the failure to deal with the issue that we now see.
	It is the same with renewables. As your Lordships are aware, I have had detailed knowledge and interests in that industry since 1997. I applaud the warm sentiments of the Government towards the promotion of renewables—wind or biomass. However, it is a complete fallacy for the Government to suggest that they will achieve their target of 10 per cent for renewables by 2010. We are getting about 2 per cent from renewables now; it will be no better than 5 per cent by 2010, which hardly helps to light the black hole that may come down the pipeline between 2005 and 2008.
	If the Government wish to improve the slow take-up of renewables, there need to be transparent, stable and predictable policies. They are not there at the moment. At present, there is a huge political and regulatory risk in the way in which government incentives for renewables are constructed—risks that cannot be hedged by companies. Developers balk at the risk involved in beginning expensive long-term capital-intensive projects. Perhaps that is why Mr Timms, our part-time energy Minister, whom I caught being persecuted—innocent fellow—on one of those early morning programmes, on Tuesday 25th November, said of the target of 10 per cent from renewables by 2010 that it is,
	"not yet in the bag".
	You can say that again, Minister. It is some way from being in the bag.
	The Prime Minister, the Government and the DTI in particular have, in this Speech, omitted to take the steps forward to deal with their responsibilities over the looming energy problems that we are at considerable risk of facing in the period 2005–08.

Baroness Farrington of Ribbleton: My Lords, this would be an appropriate moment to adjourn further debate on the Motion for an humble Address. I beg to move that the House do now adjourn during pleasure.

Moved accordingly, and, on Question, Motion agreed to.
	[The Sitting was suspended from 1.35 until 3 p.m.]
	Debate on the Address resumed.

Lord Marlesford: My Lords, we had a very good debate this morning and I am not sure how much need there is to add, but I shall do my best.
	I, too, should like to stress the reference in the gracious Speech to the key commitment to economic stability and growth but I want to put it in a historical context. I hope that everyone realises that the present relatively sound condition of the British economy is largely due to the remarkable heritage from the Conservative government of 1979–97. That was the first government since the war to challenge the socialist consensus of public ownership, trade union power, heavy taxation and resultant inflation. In my view, that consensus was a major failure on the part of previous Conservative governments.
	I am prepared to admit that the Chancellor, Mr Gordon Brown, has, perhaps at the insistence of the Prime Minister—I suppose that we shall have to wait 30 years before we know the details of that—kept faith with economic Thatcherism. I trust that in return the Government will be generous enough to pay tribute to the economic revolution of my noble friend Lady Thatcher and also her Chancellors. I refer particularly to my noble friend Lord Lawson of Blaby.
	Recently I read the Budget speeches of Sir Stafford Cripps and found it fascinating to peer back into that ancient world. At one point Chancellor Cripps lamented the fact that the British people had reached the limit of capacity for redistribution of their wealth by taxation! Let us never forget that those rates of penal taxation continued until 1979. This country owes a particular debt to former Chancellor, Nigel Lawson, for introducing in 1988 a top rate of tax of 40 per cent, which has continued for 15 years, although the Liberal Democrats are anxious to raise it to 50 per cent, which, presumably, is only a start.
	Let us look closely at the European example. Whereas Britain has progressed over the decades, some other economies have either stood still, for example, France, or regressed, for example, Germany. Germany was once the economic miracle of Europe.
	Sub-Committee A, of which I have the honour to be a member, has just published a report on the performance of the European Central Bank. We gave it a pretty good chit. I must say at once that when we visited the ECB in Frankfurt I learnt a lot. Perhaps the most important lesson is that the ECB sees its role as providing sufficient liquidity for cyclical problems but not to help structural reform. It must have learnt the lesson from all those interventions by successive British governments that cash made available for companies or governments to "put their house in order" is usually used for a breathing space not to do so.
	My greatest fear for our economy and, indeed, the world economy is a new tide of protectionism. There are ominous signs of that. First, the Doha WTO round, which was due to be completed by the end of 2004, ran into the sands at Cancun. That was partly due to the gathering force of American protectionism, as shown by steel, cotton and even by the humble avocado pear! Is it not astonishing that in a single market, NAFTA, the Americans are forbidding—on health grounds, of course—the import of avocado pears from Mexico to assist the avocado pear growers of California? You cannot be much more protectionist than that. Already this month there are signs of a new trade war. On 19th November the US announced new limits on apparel imports from China. Five days later China retaliated with tariffs on paint chemicals from the US. Two days ago the US announced 46 per cent duties on imports of TV sets from China. That is a disastrous route, as we learnt before the last war. If we are not to undo all the potential for the world economy and for our own economy, we must give free trade a real push and a fair wind. We must resist these tendencies to protectionism both at home and abroad.
	Yet the US economy has revived astonishingly well. From a GDP growth of 2.5 per cent in 2002, growth in the third quarter reached 8.2 per cent—the fastest since 1984. American corporations have restructured with vigour. They have continued to outsource their products from countries where labour costs are lower. Indeed, they have embraced globalisation to an extent that is beginning to make it resemble the 19th century colonialism that so enriched Europe and especially Britain. American companies do not, however, necessarily believe that they can preserve manufacturing jobs inside the USA, in spite of their Government's rather ill-judged attempts to help them do so.
	However, the US has a massive deficit which I believe is the main reason for the rapid weakening of the US dollar. If ever there were a competitive devaluation, this may be it. This is, of course, causing real problems for Europe. The rise in the value of the euro against the dollar by some 20 per cent in the past year alone, and some 40 per cent from its low, must be hurting and hard. The pound has fluctuated much less. Thank goodness we are not at present part of the euro.
	Like others, I cannot understand the rationale of the Government including a draft Bill in this Queen's Speech for a referendum on joining the euro when it is a racing certainty that there will be no such referendum this side of the election. However, to judge Britain's economic strength we must look closely at Europe. In 2002—the bad year for the world economy—the UK economy grew by 1.9 per cent compared with only 0.9 per cent for the euro-zone. This year our growth should be about 2 per cent whereas that of the euro-zone will be only 0.3 per cent. I refer to the rate in the euro-zone in the third quarter of this year.
	However, Britain has undergone a profound industrial restructuring which has given us full employment. I consulted the excellent figures produced by the House of Commons Library that show unemployment by constituency on a month-by-month basis. The latest figures that have just been produced show that only three constituencies in the whole of the UK have unemployment of over 10 per cent and only 14 have unemployment of over 8 per cent, whereas the 25 constituencies with the lowest rate of unemployment in the UK all have rates of unemployment of 1 per cent or less.
	However, major restructurings of our economy are needed. I wish to underline three of them, all of which were referred to this morning, and on which I consider that the Government are not being sufficiently active. First, I refer to the demographic and health changes that make it necessary to raise the retirement age, probably to 70. Why the Government have not even made a start in raising the retirement age of their own employees—at any rate those now joining from scratch—from 60 to 65, at least, if not to 70, I do not understand. We have heard much about pensions and the problems that people will face with pensions in the private sector. However, we know that people in the public sector will not face such problems because there is a money printing press and a commitment to pay index-linked pensions in the public sector—and there has been since the early 1970s. The Government should recognise that many of us believe that in the future the taxpayer will not be able to afford that generosity.
	The second point is education, on which I agree very much with the noble Lord, Lord Tomlinson. It is not simply a matter of producing more people with higher skills, but of relevant skills, which often mean artisan skills. I shall tell noble Lords a story that happened recently near where I live in Suffolk. An entrepreneur whom I know—he has a machinery business—went to a local school and said that he would like to offer four apprenticeships in welding, which is quite a highly skilled craft and very important. The careers person at the school said, "You don't understand. We are not into that sort of thing. We are in the business of producing managers".
	The chap was so concerned he rather exploded, and actually had to be escorted off the premises by the security staff. However, the story shows a terrible lack of appreciation of what education is really for. The Government say, "Education, education, education", but let us get some detail of the relevance of education—of the role that education has to meet the real needs of the country.
	My third point—energy policy—has already been mentioned by many. In this, France is well ahead of us, with 80 per cent of its energy from nuclear sources, against about only 20 per cent for the UK. In theory, of course, renewables are splendid and desirable. In practice, the Government have over-hyped them, especially wind power, to the extent that one can dismiss a lot of what they say on the subject as demagogic tokenism. I have been told that the noble Lord, Lord Sainsbury—I am sorry that he is not in his place—has a personal hang-up against nuclear power. If that is incorrect and if he were here, I would be pleased if he leapt to his feet and said that I was wrong.
	We also have to be very careful that we do not over-regulate industry. An example that has come to my notice only very recently is that there have been many complaints from companies, and even from Age Concern, about the effect of the new money-laundering regulations. Those are apparently so burdensome that the FSA's conditions are causing huge additional costs. It is the job of the Government to ensure that there is not over-regulation. It is no good Ministers delegating that to those whose instinct is to fulfil every possible regulation. That has been a problem for every government and, if governments do not keep a close eye on new regulation, it will cause major cost problems for the economy.
	I would finally like to refer—it is still very relevant—to the great discussions going on about the future of Europe. There is no doubt that the desire of old Europe is to have a level playing field in social, employment and tax policies, but the question is, "Whose level?". I know from my talks with the French that they complain about our tax policies. They say that the French come to live in England to pay our taxes, that that is not acceptable and that we need a level playing field. Again, I say, "Whose level?".
	I believe that the Government are fighting for their red lines in the negotiations on the new European constitution, and I am quite encouraged that, in the past week or so, there have been some stories in the press suggesting that the Foreign Secretary is saying that it is quite possible that it will not be necessary to get a full new constitution in the very short timetable ahead. What may be necessary is to do it in two bites—to get the changes required for enlargement, and then to come back later for the wider sense of a constitution. I would welcome that, but we want to view being in Europe as a source for growth to the UK, not as something that will drag us down. That, combined with protectionism, could change the good economic outlook that this country potentially has into one that is much more gloomy.

Baroness Thornton: My Lords, I shall start by apologising to the noble Lord, Lord Marlesford, for missing the first 30 seconds of his remarks. I am afraid that I did not gallop down the corridor fast enough.
	It is always a great privilege and somewhat humbling to speak in your Lordships' House in a debate following the gracious Speech, and to listen to the wisdom and experience brought to bear from all parts of the House on the issues at hand. I listened with interest to the expert gallop that the Minister took through the issues that we will discuss in the forthcoming year, and I am grateful for the brief but positive remarks that he made about the Government's intention to introduce a Bill to create a new company, the community interest company. It is to that issue that I shall address the rest of my remarks.
	I need to declare several interests in the matter. First, I am a Labour and Co-operative Member, and a consultant to the Co-operative Group. Secondly, I am the unpaid chair of the Social Enterprise Coalition, which is the national voice for social enterprises. Finally, I am the chair of the All-Party Group on Social Enterprise.
	I preface my remarks by congratulating the Government on bringing forward the Bill. The proposal for such legislation was first mentioned in a Cabinet Office paper called Private Action, Public Benefit, which was discussed in this House almost two years ago. In March this year, a consultation on what the Bill might contain was launched. It was launched not by one Cabinet Minister, but by four. We thought that that augured well for its future prospects. Since then, there has been serious and comprehensive consultation. On behalf of co-operative organisations, I want to say how much that has been appreciated, and that there is widespread and considerable support for the Bill in co-operative, mutual and social enterprise sectors.
	It might be worth taking a moment to talk about social enterprise in general. It is a term that increasing numbers of people have heard but know precious little about. Does it mean charity with an entrepreneurial edge? Possibly, but not really. Does it mean business being socially responsible? Again, yes, but that is by no means the whole picture. In fact, businesses all over Britain are trading and making profits, and doing so for a social purpose. They are businesses distinguished by their social aims, their ownership and management structures, and how they use surpluses for the benefits of employees, consumers and the local community. In Europe as a whole, it is estimated that 3.5 million jobs are provided by social enterprises.
	Crucially, social enterprises compete in the marketplace like any other business, but they use their business skills to achieve social aims. They are part of the broader social economy, but whereas many voluntary organisations and community groups may be involved in some kind of trading activity for goods and services, social enterprises see trading as a significant and defining part of their business. Although some commentators like to use the term "not for profit" when referring to social enterprises, that is misleading. Social enterprises aim to sustain their business and make profit but, as the Government's own definition of social enterprise makes clear, any surpluses are reinvested to serve their social aims. It is those aims that drive the business rather than the need to deliver profit to shareholders and owners. That was the definition in the social enterprise strategy launched by Patricia Hewitt in July 2002.
	There are three characteristics that social enterprises share. First, they are enterprise-oriented, directly involved in producing goods or providing services to a market. Secondly, they have explicit social aims, such as job creation, training or the provision of local services. They have ethical values, including a commitment to building skills in local communities. They are accountable to their members and the wider community for their social, environmental and economic impact. Thirdly, they are autonomous organisations with governance and ownership structures based on participation by stakeholder groups, be they users, clients and local community groups, or by trustees. Profits can be distributed as profit-sharing to stakeholders or used for the benefit of the community.
	That is not new. Social enterprises have been around in all but name for many years, stretching as far back and as long ago as 1844 when, suffering at the hands of exploitative factory owners and shopkeepers who charged extortionate prices, 28 working men in Rochdale scraped together £28 to open their own shop, thus heralding the beginning of the Co-operative movement.
	Social enterprises can, however, take many forms. They can be a social firm one minute and a co-op the next. They can be a development trust, an industrial and provident society, a community interest company or the trading arm of a charity. However, a social enterprise is not defined by its legal status or its name. What it does is social. What is important is the basis on which the social mission is embedded into the business in a form of ownership and governance, and the way in which it uses the profits that it has generated through its trading activities. They come in many shapes and sizes. A phrase that one will hear in a conversation about a social enterprise is "double or triple bottom line". That describes the enterprise's dual or sometimes triple aim to meet its financial, social and often environmental goals.
	Why do people set up those organisations? What is the motivation behind social enterprises and social entrepreneurs? That question is often a stumbling block for people who try to understand the sector. It is sometimes difficult to take at face value the claim that an individual or an organisation is driven by the wish to do good or to change things, especially if that individual or organisation is a business entrepreneur or a company competing to win business in a market against other organisations, be they from the private, voluntary or social enterprise sectors.
	Perhaps it is more helpful to look at the issue from a different angle and to consider how and why particular social enterprises come into being. If noble Lords were to visit the Social Enterprise Coalition's website, and I recommend that they do so, they will see strong themes emerging on that subject. Some enterprises such as the Heskett Newmarket village brewery or Loch Fyne Oysters are a result of a private buy-out, either by staff or the local community. They are groups of people bonded together by a shared community interest who have sought to translate that bond into a new social enterprise structure.
	Other examples are spin-offs from existing businesses; for instance, the housing association that has decided to build a construction company or the furniture recycler who has gone into partnership with its local authority to collect people's old sofas and wardrobes. For some, the aim is to deliver better public services, such as the delivery of nursery services by the Oxford, Swindon and Gloucestershire Co-operative Society. The leisure trust in Wycombe is another example. That is one of more than 100 locally owned leisure trusts which is run to provide local leisure services at local level.
	In many cases, social enterprises have flowed from the imagination and drive of a single entrepreneur. Nearly all of them are there because someone spotted a gap in the market and found a market in that gap. Often, that gap has been the result of public service or private market failure. Some development trusts and co-ops, such as the charity Trojans, which runs after-hours activities for primary schools, have appeared when people in the community have felt let down or in need of something that they were not going to receive from the private or public sectors and decided to do something about it themselves.
	The new Bill will seek to establish a new company and a regulatory framework for it. Those of us who will be supporting and working on the Bill during its passage through Parliament will pay particular attention to certain aspects of the Bill; for example, the robust nature of the regulatory regime as it applies to the community interest company.
	The CIC will have to pass a test of how it benefits the community and therefore how it is distinct from an ordinary company. How will that be achieved? What will the test look like? If it is "light touch", will it be so light as to allow anyone through the net, thereby devaluing the CIC brand? However, if it is too onerous and bureaucratic, the take-up for CICs will be low, thus fuelling detractors and sceptics. Striking the right balance will be very important.
	Will the sector that has been so involved in bringing the Bill forward also be involved in the appointment of the regulator? We will have to examine how the proposed asset lock will work. What information must be included in the CIC's annual report? Where will the cap for the dividend payable on "investor" shares be set?
	The secondary legislation that will follow from the Bill will be very important. I would like an assurance that the serious and thorough consultation that has characterised the process so far will indeed continue.
	At all stages of the consultation process, we have stressed the importance of reform of the industrial and provident societies legislation that should go in tandem with the creation of the CIC. I am sure that I will not be alone in making that point as the Bill progresses. It is unacceptable that there will a nice, new, cheap, easy-to-use vehicle in the shape of the CIC when the legislative and regulatory framework governing co-operatives and others is a somewhat creaky Ford Anglia at best. Despite the heroic work of my honourable friends Mr Gareth Thomas, Mr Mark Lazarowicz and Mr Mark Todd in another place in succeeding with three Private Member's Bills in the past two years that have made huge improvements to the industrial and provident societies legislation, a great deal still remains to be done.
	In the way that government works, the DTI is sponsoring the CIC, while the Treasury and the Financial Services Authority are responsible for the legislation that governs the industrial and provident societies. However, I am pleased to report that many of the industrial and provident societies, which range from huge co-operative movements to women's institutes, are succeeding in their discussions with the different parts of government that are involved in the matter. We need to focus on the issue and ensure that the momentum is maintained.
	Our job in Parliament is to test and improve the new CIC in its passage through Parliament, and when the Bill becomes an Act, to add it to the family of different ways to set up co-operatives and social enterprises. The Government will then have to promote that new form of company and promote it across government departments and industry. I would like some assurance that resources will be made available to do that. If the new law is not promoted across government, it will fail. For example, the ODPM and the Neighbourhood Renewal Fund have not so far engaged with social enterprises in the way that one would wish and I hope that as the Bill is promoted, those problems will be remedied. It is a good proposal and I look forward to working on its development.

The Lord Bishop of Hereford: My Lords, I am somewhat surprised to find myself speaking in this debate on the gracious Speech on this particular day. However, I do recall that on one occasion, I put my name down to speak in a budget debate about some minor ecclesiastical matter and found myself promoted to number four in the speaking order, which was an alarmingly exposed position. I am therefore glad that I have been able to claim the last slot in this short list of speakers on the economy, industry and pensions. Those are not my main area of expertise, as your Lordships will know, and I would much more naturally be speaking in a week's time on rural affairs and agriculture, but by then, it will be too late because I shall resign my see and no longer be a Member of your Lordships' House.
	I hope that I may trespass on your Lordships' time for a moment to express my thanks for the privilege and pleasure of playing a very small part in the business of this House during the past seven years or so and to express my gratitude for the warm welcome, the courtesy, the friendship and the good advice that I have received from all Members on all sides of this House. I am grateful also for the wonderful help of the staff, who serve us in this House with such courtesy, efficiency and skill.

Noble Lords: Hear, hear!

The Lord Bishop of Hereford: The noble Lord, Lord Patten, is in his place. He invited me to respond to some of his remarks in his excellent speech. I thought that he had gone off to make a confession to someone better qualified to hear it than me. Let me assure him that I thoroughly disapprove of theft and boardroom malpractice, but that, as far as capitalism is concerned, my opinion is that, if properly regulated, like hunting, it is morally all right.
	I greatly appreciated the speeches of the noble Lord, Lord Tomlinson, and the noble Baroness, Lady O'Cathain. Although I had rather hoped to hear more from some of our great captains of industry, it was good to be led into the area of social enterprise by the noble Baroness, Lady Thornton, and to be reminded of the possibilities of breweries and oysters.
	My main point is relevant to the topic of today's debate, though some may doubt it. I shall digress just for a moment to express a warm welcome to the announcement in the gracious Speech of the pension protection fund and to the promise of legislation for civil partnerships, particularly in its helpfulness in terms of inheritance and pension issues.
	I turn to my main point. Some of your Lordships may recall a short story by H G Wells, which gripped my imagination at the age of 12 or so. I should like, if I may, to read a short quotation from it. It will at least make a change from OECD statistics and the growth and stability pact. It is as follows:
	"The master mathematician sat in his private room and pushed the papers from him, exhausted after four days and nights of feverish calculation.
	"But he appeared calm and unruffled before his students at their morning lecture . . . 'Circumstances have arisen—circumstances beyond my control', he said, 'which will debar me from completing the course I had designed. It would seem, gentlemen'"—
	forgive the non-inclusive language of 100 years ago—
	"'if I may put the thing clearly and briefly, that—Man has lived in vain'".
	The "circumstances" referred to are that his calculations have revealed that a star is on course to approach very close to the Earth, or possibly even collide with it—a huge cataclysmic astronomical event. In the end there is no collision—it is only a short story, after all. The star passes the Earth and goes on its way into space. But its near passage has catastrophic consequences for the planet. There are immense floods, great surges of the sea, huge earthquakes, violent and continuing storms, vast mudslides, uncontrollable fires and a colossal rise in temperature to unbearable levels. Most of the human race perishes. A few survivors find that the former polar regions have become fertile while the rest of the Earth is uninhabitable because of the great heat. The event, my Lords, is not good for the economy or for industry and certainly not for pensions.
	That is fiction, but the catastrophic effects described so vividly by H G Wells are not wholly unlike what is actually likely to happen as a result of climate change and will certainly grow rapidly worse if we continue with business as usual. The master mathematicians of the Intergovernmental Panel on Climate Change have made their calculations, and they are very scary indeed. The evidence is already all round us: unprecedentedly high temperatures, drought, rising sea levels, melting glaciers and ice caps, more frequent hurricanes and extreme weather events. Heroic efforts to reduce hunger in the world are frustrated by worsening climatic conditions. The United Nations report published two days ago indicated that 842 million people are going hungry, and that number is now increasing by about 5 million a year in contrast to the improving statistics of the 1990s. The few developing nations which have bucked this melancholy trend have not been the authors of their own good fortunes; they have simply been lucky—lucky to escape the high levels of drought and the natural disasters which have increasingly afflicted the third world in the past decade.
	For us the dire effects of climate change may still seem in the future. But as the science fiction writer William Gibson put it:
	"The future is already here: it's just that it's unevenly distributed".
	And it is nearer than we care to acknowledge: thousands of deaths from extreme heat in France this past summer; and seriously reduced crop yields in central and even northern Europe because of this year's exceptional drought. But was it exceptional?
	It is not surprising or novel. We have seen it coming for a good many years, and wise scientists have pointed the way to a solution—a solution which would enable our economy to survive, our industry to flourish in a truly sustainable way, and even our pension schemes to be put on a secure footing. As it is, all three are in very grave danger.
	Three years ago, in the executive summary to its magisterial report, the Royal Commission on Environmental Pollution said:
	"The most promising, and just, basis for securing long-term agreement is to allocate emission rights on a per capita basis—enshrining the idea that every human being is entitled to release into the atmosphere the same quantity of greenhouse gases. Because of the very wide differences between per capita emission levels round the world, and because current global emissions are already above safe levels, there will have to be an adjustment period covering several decades in which nations' quotas converge towards the same per capita level. This is the principle of contraction and convergence, which we support".
	The commission might have added that contraction and convergence is comprehensive, scientifically based and equitable, unlike the Kyoto Protocol, and that contraction and convergence meets every single objection raised by the United States to Kyoto.
	That was three years ago. Two years ago, the Amsterdam Declaration, the report of the Global Change Open Science Conference, said:
	"In terms of some key environmental parameters the Earth System has moved well outside the range of natural variability exhibited over the past half million years at least. The nature of changes now occurring simultaneously in the Earth System, their magnitudes and their rates of change are unprecedented. The Earth is currently operating in a non-analogue state".
	Just one year ago, I was engaged with the Minister who opened this debate, the noble Lord, Lord Sainsbury of Turville, in correspondence following a Starred Question. The Minister wrote to me:
	"The Government is aware of the policy of Contraction and Convergence"—
	be thankful for small mercies. He continued:
	"As you will be aware, the policy requires industrialised countries to make enormous reductions in carbon emissions (up to 80 per cent). Contraction and Convergence have some appealing qualities, but discussions on future commitments to this policy are at an early stage, and there are likely to be other models which will need consideration. Contraction and Convergence was not in fact raised at the World Summit on Sustainable Development in Johannesburg".
	Indeed not, and shame on our Government for not raising it. Leaving aside the confusion in the Minister's letter over whether contraction and convergence should be regarded as singular or plural—although the muddle within one paragraph does not inspire confidence in the grammatical competence of the department's staff—this seemed to me a mealy-mouthed and very inadequate response to the most serious problem threatening the human race and the survival of the planet.
	There was yet hope that the energy White Paper earlier this year might grasp the nettle and set out a ringing endorsement of contraction and convergence, or at the very least announce an urgent debate on the matter. Alas, those words did not appear, despite the fact that the Prime Minister's foreword to the White Paper acknowledged:
	"Climate change threatens major consequences in the United Kingdom and worldwide, most seriously for the poorest countries who are least able to cope".
	Amen to that, and the hunger statistics bear out the truth of that melancholy message.
	Interestingly, and very much apropos of the theme of this debate, the Prime Minister went on to say:
	"As we move to a low carbon economy, there are major opportunities for our businesses to become world leaders in the technologies we will need for the future".
	How very true, and how sad that the United Kingdom has at the moment 4 per cent of the market in environmental technology compared with Germany's 15 per cent.
	Prophetic witness and vigorous political action are needed to change the culture of government and of industry, but—rightly used—technology can serve the purposes of environmental concerns and begin to clear up the polluted legacy of two centuries of unbridled and environmentally irresponsible industrialism. The potential for selling green technology to the developing world in terms of clean energy generation, integrated crop management in agriculture, husbanding finite water resources, desalination, not to mention the obvious areas of pharmaceutical and medical resources to cope with the colossal AIDS epidemic all offer the prospect of a very creative partnership between the technologically advanced countries and the poorer nations of the world in a way which positively benefits the environment rather than adding to its degradation. If we were to embrace contraction and convergence, with the enormous and comprehensive emissions trading system which is envisaged, the poorer nations would have the means, which at present they do not have, to buy the green technology from us. That would be very greatly to our economic and industrial advantage.
	However, that requires the change of culture of which I spoke. At present, the position is getting rapidly worse. There is enormous and accelerating economic growth in India, China and South East Asia. China's oil consumption this year will be 10 per cent higher than it was last year. The Kyoto Protocol—if and when it is implemented—will reduce CO 2 emissions from the annex 1 countries by 2 per cent, but global emissions are projected to rise by 30 per cent by 2012. It has been calculated that if storm damage continues to rise by the present 12 per cent a year—it will probably be worse than that—by 2065, annual damage caused by climatic destruction could equal the entire GNP of the world. That is a very black hole into which every known or imaginable pension plan would certainly fall.
	Unless we find a way now to deal with the greenhouse gas problem internationally, growth will slow or stop anyway at very great human cost. By the middle of the century, there will be hundreds of millions of ecological refugees, starving and desperate, who will make our present asylum-seeker problem look very insignificant.
	My normal mode of address to your Lordships' House is, I hope, cool and rational. The mantle of the prophet is not one that sits very readily on my shoulders. I recall that the fate of most Old Testament prophets was to be mocked, ignored and driven out of town. I am quite prepared for that but, like Luther, I can say only, "Here I stand, I can do no other", because I know that the threat to our economy and industry and to civilised life is very great indeed.
	"Climate change" were the last words in the substantive part of the gracious Speech. I am glad that they were there but I wish they had been at the beginning—in the preamble to the list of legislative proposals—indicating that the Government recognise the urgency and seriousness of the issue and see all other proposals in the context of tackling climate change with an energy and a single-mindedness which have yet to be seen.
	The need is for leadership in breaking the straitjacket of short-term electoral cycle and in striving for all-party agreement so that there is no competition or disagreement about the urgency of this matter. There is also a need for leadership in setting up a community for global climate protection, which any and all who will participate are welcome to join. If some dirty dinosaurs such as the United States will not come in now, that is too bad. Someone must give a lead and we cannot afford to wait. There may just be time to act before a terrifying chain reaction of unstoppable, runaway climate change begins.
	Klaus Toepfer, the highly respected head of the United Nations Environment Programme, said:
	"The scientific consensus presented in the comprehensive [Intergovernmental Panel on Climate Change] report . . . should sound alarm bells in every national capital and every local community".
	My fear is that by the time our Government hear those bells and act on them it may be too late.

Lord McNally: My Lords, I have no difficulty in following the right reverend Prelate either chronologically or in spirit. I am under strong orders from colleagues in all parts of the House to register our thanks for his contribution on rural affairs. However, I believe that if that was his valedictory address, it contained messages which will be taken to heart in all parts of the House.
	I should say to the right reverend Prelate that, in times gone by, the dividing line between high Church office and active politics was very much narrower and that it is not too difficult to make the cross-over. Therefore if, in the weeks and months ahead, he wants to contemplate the future, I can tell him that the Liberal Democrats have an excellent candidate training programme. The only downside that he should consider is that, looking back in history, the Prelates who have made the transfer from the Church to politics have usually ended up either in the Tower or on the block. Therefore, it is a dangerous move.
	I welcome many parts of the gracious Speech. Perhaps I may immediately follow the noble Baroness, Lady Thornton, on the subject of the social enterprise proposals. They are very welcome and she can rely on support from these Benches when we come to the legislation. Indeed, as I believe I have suggested on previous occasions, perhaps radio enterprises and sports enterprises could be included to save successful enterprise in this area from being usurped or asset-stripped by commercial interests.
	I also welcome the fact that there will be a review of the 1999 employment legislation. Perhaps the Government will consider a gap which still exists in the legislation in relation to a type of secondary picketing not covered in the 1980s. By that, I refer to the use of public harm as leverage in an industrial dispute. We have seen far too much of that and I hope that the review will take it into consideration.
	Ministers will have heard so many expert warnings about the pension industry from noble Lords such as the noble Lords, Lord MacGregor, Lord Freeman and Lord Higgins, that they will, I hope, take them very much to heart. The other day, I mentioned the feeling among Equitable Life pensioners that justice delayed is justice denied. There is a general dissatisfaction that, when such problems occur in financial services, the process of rectifying the fault is all too slow. I shall say to Ministers only that we have been warned about an ageing population. The ageing population is a voting population and therefore they should beware its retribution if they do not deal with this matter.
	I share the general scepticism about the draft euro referendum Bill. I believe it should be renamed the "Lord Pearson of Rannoch Dyspepsia Bill" and be done with it because I do not believe that anyone really believes that it is anything other than a piece of window-dressing.
	The noble Lord, Lord Sheldon, may have noticed that there is no Civil Service Bill in the gracious Speech. When one considers that the previous Cabinet Secretary, who is now in this House—the noble Lord, Lord Wilson—all but drafted a Bill for the Government, it really is taking them a long time to bring it forward. Again, there have been repetitive warnings of a hole in energy policy. The Government need to take seriously the warnings on energy, but my noble friend Lord Ezra will deal with that issue when the Bill comes before the House on 11th December.
	Missing from the Benches on my left is the noble Lord, Lord Saatchi, who was recently promoted under the new Conservative system. He is part of the Conservatives' new strategy of time travel, with Michael Howard as an unlikely Doctor Who. The noble Lord, Lord Saatchi, has been drafted in to bring them bang up to 1979, and therefore one can see how far that is moving.
	On the Government Benches is the noble Lord, Lord McIntosh, immovable like a rock, although he is now a fully fledged departmental Minister in his own right with responsibility for broadcasting. He is there when we have sums on the agenda. I believe that he must be the only one that can do the calculations for the Government, although I have often thought that the noble Lord, Lord Desai, could do the job equally as well but without being so well controlled.
	My noble friend Lord Newby opened for these Benches and warned that he considered the economy to be a curate's egg. Usually that could be dismissed by Ministers as a little piece of rhetoric. However, it so happens that my noble friend Lord Newby is married to a curate. Therefore, his opinion and expertise on curates' eggs are to be taken considerably more seriously than those of others. I hear from behind, "She's not a curate; she's a vicar", but why spoil a good joke for a fact?
	As the noble Lord, Lord Marlesford, indicated, the Conservatives bequeathed to the Government a strengthening economy, and they can take credit for that. It was the Liberal Democrats, not new Labour, who had in their 1997 manifesto the giving of independence to the Bank of England, so we can take credit for that. Mr Brown and his long-term partner, prudence, helped to sustain that progress but, as the noble Lords, Lord Sheldon and Lord Newby, reminded us, we are not quite sure whether prudence still occupies the same place in the Chancellor's affections. We on these Benches supported increases in public expenditure, such as NHS funding, and believe that it should be funded from extra taxation. We do not have the same hang-ups as the noble Lord, Lord Marlesford. That is the honest way to run Government.
	However, in this emphasis on growth—certainly, the nine years referred to is a triumph—we are also entitled to ask for philosophy behind the drive. I listened to the declaration of faith by the noble Lord, Lord Patten, in the mystical powers of capitalisation and the response and riposte by the right reverend Prelate. From the Government Front Bench I wonder whether we are now committed to the invisible hand of the market and the unstoppable will of consumer-dictated policy.
	I recently attended the CBI conference which was addressed by both the Chancellor and Mr John Snow, the US Treasury Secretary. It was difficult to work out which was the Labour Chancellor and which was the right-wing Republican. Certainly, the Chancellor's emphasis on the enterprise economy, which was advocated by a number of speakers—the noble Lords, Lord Tomlinson and Lord Paul, the noble Baroness, Lady O'Cathain, and the noble Lord, Lord Haskel—did not seem to match the kind of body language or rhetoric that was applied at the Labour Party conference.
	Over the past 20 years there have been changes in all parties in the attitude to the economy. The old Butskellite consensus broke down in the 1970s. However, we have all learned lessons. "Greed is good"; "There's no such thing as society", the free market and Reagonomics produced problems in our society as well as creating wealth.
	The problem we face today is whether the dash for growth, if not accompanied by serious social action to deal with the underclass and those left out from the success of growth, will cause resentment and social unrest, which will damage the benefits of growth. I was recently struck by a pronouncement by two learned bodies, the Royal Society of Arts and the Institution of Civil Engineers. The Royal Society of Arts published a manifesto calling for the encouragement of enterprise but also for a zero waste society, the fostering of resilient communities, the developing of capable communities and the advancement of global citizenship.
	The Institution of Civil Engineers had a whole raft of policies on housing, and stated that there needs to be an increase in the proportion of affordable housing. I was rather shocked the other day to discover that this Labour Government have built 3,000 council houses in six years. That leaves a real problem of affordable housing, which has to be addressed. On transport the institution stated that it cannot be right that the delivery of our nation's transport policy depends on banks deciding whether they can make a profit. On energy it called for building into the infrastructure to allow renewables to be transported to the point of need. On waste, it stated that a properly-funded authority is needed to invest in waste management. On water, it points out that of 300,000 kilometres of sewers, only 265 kilometres were properly rehabilitated in 2001–03 because water companies are currently being bought and sold for cash.
	Neither of those two bodies are in what one would call the "woolly liberal" category. However, they both emphasised the need for social and environmental dimensions to economic policy. I recently attended a conference addressed by the head of research at Goldman Sachs who lifted the spectre in terms of the world economy of the rise of the "BRICs": Brazil, Russia, India and China. He pointed out that in the next 40 years or so those countries would take the jobs and adopt many of the patterns of world trade which the old areas have assumed their own. Therefore, the need to upskill our own economy becomes very important and needs to be matched with parallel social policies.
	I now live in the eastern region of England, one of the most successful parts of the British economy but one that still has 28 per cent of children and 30 per cent of pensioners living in poverty and 10 per cent of people unemployed. We have to manage our economy in a way that does not leave an underclass. We must also realise that from the area of my origins and that of the noble Lord, Lord Sheldon, the old motto of "Where there's muck there's brass" no longer applies because there is not the inward investment of footloose industries into areas where the environment is polluted, the education is poor, the health service is inadequate, housing facilities are bad and leisure facilities are not good. I deal quite a lot with encouraging inward investment in country towns and regions. When one sees how they sell themselves on the new global market, one realises how policies have to be inter-related, particularly those on economic growth.
	Six years ago Labour supporters were able to sing with real enthusiasm, "Things Can Only Get Better". To a certain extent now they are singing that with a little desperation in their voices. There was a kind of sleepy complacency about the gracious Speech, a middle-aged spread which is bad for the Government and which we shall try to expose in the months and years ahead.
	Just to show that all is not lost on the Government Benches, I discovered a document produced by the strategic audit office of the Cabinet Office which stated,
	"Statistical research shows that high trust is linked to:
	being perceived as honest
	working in the public interest, or for moral causes, rather than for vested or private interests
	working locally, or via frequent interaction with the public. "For government and public services there are important lessons to be learned from other sectors, for example about the importance of keeping promises; learning from mistakes; being interested in people's views, and when things go wrong trust is rebuilt more by showing how the same mistake will not be repeated rather than [denying them]".
	That is wonderful stuff. The only problem is that it states at the top:
	"This . . . document does not represent Government policy".
	I think it is time that it did.

Baroness Miller of Hendon: My Lords, it is just 10 years since I had the privilege of becoming a Member of this House. It is also exactly 10 years since I made my maiden speech in the debate on the gracious Speech, in which I talked about being held up at the hairdressers by six armed gunmen. The making of my maiden speech was slightly less terrifying than the episode in the hairdresser. It is equally terrifying to attempt to make a wind-up speech on the excellent speeches that we have heard today.
	Noble Lords may not realise that this is the first time that I have made a wind-up speech. My husband is always very kind and gives me a crystal ball view of what he thinks will happen—well, not exactly a crystal ball: he tells me. I have no such thing on my desk to make the task much easier.
	As is the custom, I begin by commenting on the notable omissions from the gracious Speech. I was surprised at the beginning of the debate when the noble Lord, Lord Davies of Oldham, mentioned a Bill to be introduced that did not appear in the gracious Speech. While talking on that subject, perhaps I may welcome back the noble Lord, Lord Sainsbury, to his rightful place on the Front Bench. Other noble Lords and I were very concerned that perhaps something dreadful had kept him away from here. We very much hoped that it was not the thought of having to listen to me.
	I shall refer later in these remarks to the absence of an adequate companies Bill. I am surprised that the Government have not seen fit to produce a new consumer credit Bill, a point mentioned by the noble Lord, Lord Newby, in his most excellent speech. The last such legislation was in 1974 and the DTI announced a review of it in July 2001. At the moment, the legislation regulates only credit and hire purchase agreements up to £25,000, which of course was a substantial amount some 29 years ago. But now, as the noble Lord, Lord Newby, said, we see adverts on the television telling people how easy it is to get money. I have seen one advert saying that one can get £300,000 and that one could buy a new car with it, which only encourages people to get more in debt.
	The Bank of England is reported as being worried about the long-term effects of the mountain of all forms of debt being piled up. On a similar subject, there is still no Bill to regulate the banking industry. The final report of the banking review was published in March 2000. Do we now have to assume that the banking review has been effectively kicked into touch? Perhaps the Minister will comment on that matter if he knows, or write to us.
	I would like briefly to mention the excellent contributions of my noble friends and speeches of other noble Lords in the debate today. My noble friends Lord MacGregor and Lord Freeman concentrated on pensions. Indeed, my noble friend Lord Freeman agreed with so many points made by our noble friend Lord MacGregor that he said there was no point in repeating them; I shall not do so either. My noble friends welcomed the statement in the gracious Speech that there was to be legislation to encourage employers and employees to participate more in pensions and wondered whether there would be any incentives to make that happen.
	My noble friend Lord MacGregor was concerned at the requirement to take out annuities at the age of 75. My noble friends both mentioned the worry that in order to have adequate pension provision in future people must start working earlier and work for much longer. My noble friend Lord Marlesford also mentioned that in his comprehensive speech.
	My noble friend Lady O'Cathain in her very good speech gave an account of all kinds of energy. She gave many facts and figures, the future prospects for energy sources and what will happen when they run out. She made a very interesting suggestion that consideration should be given to redefining nuclear energy as a renewable source instead of counting it as a fossil fuel and so attract the climate change level. The right reverend Prelate talked about his concern about the climate change levy. My noble friend admitted that this was not her novel idea—she could not claim that—but that it was now being done by the state government in Ontario, Canada, who have now extended tax concessions for renewables to nuclear power.
	My noble friend Lord Patten also spoke comprehensively on energy, in which he has great experience and knowledge. He highlighted many problems for companies. The noble Lord commented that whatever regulations and legislation are brought in to stop a dishonest director from behaving in a way that he should not—such as stealing from the company—no amount of regulation will actually stop the man if indeed he had made up his mind to steal. My noble friend suggested that he needed to talk to the right reverend Prelate to see how we could bring in an ethical dimension, which the right reverend Prelate has always done from those Benches. On a lighter note, we all enjoyed his description of some of the interviewers on the BBC who have now developed a new behaviour called "repetitive questioning syndrome". We should all be aware of that if we ever have to face them on the television or the radio.
	The noble Lord, Lord Haskel, spoke of the need for more enterprise in management's thinking and particularly in manufacturing. One noble Lord asked what had happened to the Government's pledge to bring forward a Bill on this matter. I regret that I cannot remember which noble Lord it was. I suspect that it might have been the noble Lord, Lord Paul, but I am not sure. On that point, I just say what a pity it is that he was the only captain of industry to speak today. I hope other captains of industry, who might possibly—

Lord McIntosh of Haringey: My Lords, I refer to the noble Lord, Lord Haskel.

Baroness Miller of Hendon: My Lords, I apologise. The noble Lord, Lord Haskel, as we were on the same list, will not forgive me for not including his name. I hope that other captains of industry on reading the debate tomorrow or at some stage might take note and come and help us in these debates by sharing their experiences with this House.
	The noble Lords, Lord Grenfell and Lord Sheldon, made very interesting and excellent contributions to the debate, as always. The noble Lord, Lord Grenfell, highlighted the problems of economic regimes on the very poor position of the textile industry in Lancashire. I feel much sympathy for him on that; not because I know the textile industry in Lancashire, but because I have often had to speak about the manufacturing problems in this House.
	The noble Lord, Lord Tomlinson, used a phrase that rang a bell with us. He said that the,
	"EU was driving a coach and horses through the stability pact".
	We all agree with that. Economic stability is absolutely essential to make sure that we have the economic growth we want. He also made a most interesting intervention when speaking about energy—with which we would probably all agree—that until the renewables are in place and sustainable energy is being delivered, all other systems including nuclear, should not be phased out in advance.
	My noble friend Lord Marlesford paid great tribute to my noble friend Lord Lawson who, when Chancellor, lowered the top tax rate to 40 per cent. Despite some noise I heard from my colleagues to my right, I hope that no Chancellor will actually do that.
	As the Opposition spokesman for trade and industry, I sometimes—my noble friend Lord Patten mentioned this—ask myself what the DTI is for. It used to preside over great industries, all of which I think are now privatised. What the department has presided over since 1997—perhaps the noble Lord, Lord Sainsbury, will forgive me—is really the obliteration of a great deal of our manufacturing industry. We are also seeing the start of the decline of our service industries by the export of work to data and call-processing centres as far away as the Indian subcontinent and the Philippines.
	What did the Secretary of State say about that loss of jobs? She said that it was really worthwhile because of the benefit afforded to countries such as Pakistan. Tell that to the workers here. That is not the kind of message they particularly want. Her department has just announced that it is to shed 500 staff. That is no wonder with that attitude at its head. They will hardly be missed because there will still be 922 more people working in the Department of Trade and Industry than in 1997. In June 2003, there were 200,000 more jobs in the public sector than in the previous year, while during that same period 133,000 jobs were lost in manufacturing alone.
	In Written Answers to me on 22nd September, I was informed that 44,651 extra clerical, administrative and managerial jobs had been created in the National Health Service alone since 1997. Furthermore, no information was held centrally to account for the extra £19 billion that public sector jobs were estimated to cost by 2006, over the 1997 figure.
	The noble Lord, Lord Sainsbury, gave many interesting facts. The noble Lord, Lord Newby, talked generally about those facts being a curate's egg. The noble Lord will understand why the figures I mention are slightly different; they involve matters that he did not discuss. In 2002, there were 16,305 insolvencies, which was the highest number since 1994. In the same year, the profitability of British companies fell to its lowest level for a decade and the balance of trade deficit, running at a staggering £394 billion a year, was the highest since any records available—since the year 1697; 300 years ago. I checked that twice because I could not believe it.
	That is despite the golden economy that the present Government inherited in 1997. There have been 19,332 new regulations; 15 for every working day. Taxes have risen from £270.7 billion in 1997 to £402.9 billion this year. Of that, £54 billion has been the increased cost to industry and commerce. All noble Lords are concerned about that. No wonder that the CBI complained:
	"British Businesses are under mounting pressure to move their operations overseas, and nearly one in three of those surveyed has already taken steps to relocate abroad".
	Among many others, it gives the main reasons as red tape and tax.
	None of the legislation announced in the gracious Speech offers to do much to stem the tide, but we are to expect another employment relations Bill. We have not yet seen the Bill, so we do not know what is in it, but various kites have been flown. One is that unions will be able to expel members whose behaviour and attitudes are incompatible with the union's rulebook. I am sure that that is an excellent thing to do, because it would enable the expulsion of racists, but it will have to be carefully worded to ensure that it does not enable union bosses to expel people who are nothing more than trouble makers to them, who should be left where they are.
	It is also suggested that the Government will attempt to repeal Section 17(4) of the 1999 Act, which gave employees the right to contract as individuals for better personal terms than available in any collective bargaining agreement. I pick that out because that is the only amendment that we won in both Houses. I am proud to say that I won it; it was called the Miller amendment. The following Trades Union Conference said that it had to get rid of it. So the Minister will understand when I say that that will be a hard job; I shall fight for it.
	We are promised a limited new companies Bill to add to the patchwork of company legislation already on the statute book. In 1998—more than five years ago—the DTI launched a review of core company law. In 2002, the Government published their response to the review in a White Paper and claimed that the changes could save small private companies £168 a year.
	That should have been an inducement to the Secretary of State, Patricia Hewitt, to get on with the job. But no, a full year later, the Minister for Industry and the Regions told the other place that legislation could not be introduced this year because, despite all the extra staff in the department, further work was needed on the legislation. Indeed, the noble Lord, Lord Sainsbury, introducing this debate, said simply that it is not ready. The delay in producing a new substantive companies Bill has been criticised by the CBI, the Institute of Directors and the Federation of Small Businesses, as well as others. We seem to be about to receive a sort of sticking plaster Bill that the Institute of Directors has described as "sexy legislation" to deal with accountancy practices following the Enron and WorldCom failures.
	On the subject of companies, we certainly welcome the community interest companies—I note that the noble Baroness, Lady Thornton, declared three interests and showed in her speech that she knows much about the matter, so she will no doubt be involved with the Bill. We will want to scrutinise the Bill carefully to ensure that those companies provide a real benefit to the voluntary sector.
	The gracious Speech announced an energy Bill, which will begin its progress in your Lordships' House. As it will be a House of Lords Bill, the Government will be unable to propose the necessary Money Resolution here. The two main parts of the Bill are to deal with the nuclear decommissioning agency and to set up a single wholesale market in electricity trading and transmission throughout the whole of the United Kingdom. Clearly, many costs will be involved. I must assume that that will be one of the first provisions made in the House of Commons when the Bill reaches it.
	I have been rushing against the clock, but it is all right, because the Minister said that we have 20 minutes in which to wind up; I want to say more things but I do not want to overrun my time. Many of the facts about energy to which I would have referred have already been cited by my noble friends Lady O'Cathain and Lord Patten. However, I should like to mention a couple of things. Early in November, at a meeting in Brussels, British officials failed to water down a clause in the draft constitution that would give Brussels power over gas and oil reserves, which could go the same way as our fish stocks. When he replies, will the Minister unequivocally confirm that in no way and in no circumstances would that point be conceded?
	While I am discussing interference by Brussels in our fuel and power industry, our entire coal industry could be wiped out because of a new EU directive to limit sulphur emissions. That would cost 15,000 jobs. The Government are not doing anything by way of grants and subsidies to encourage electricity, steel and other heavy industries to fit sulphur-reducing equipment in individual plants, instead of importing low-sulphur coal from abroad. I hope that they will.
	The retiring chairman of BNFL has expressed disappointment at the Government's failure to provide for the construction of new nuclear power stations in the energy White Paper published earlier this year. In view of that, do the Government agree that it is an inopportune moment to force BNFL to sell its United States business, which BNFL considers to be a central part of its strategy of building an integrated nuclear business?
	On 17th November, my noble friend Lord Peyton of Yeovil asked when the Government will explain,
	"What they mean by 'keeping the nuclear option open'".—[Official Report, 17/11/03; col. 1769.]
	We did not receive a satisfactory answer. I ask the question again: will it be this year; next year; or in five years' time? For how long will it be kept open? Nuclear energy is a business with massive lead times. Decisions must be taken now that will be effective in 10 years' time. Decisions not taken now could leave fatal gaps if the Government decide that they want to keep that option open. Perhaps the Minister will answer that.
	Following that Question, I asked the Minister whether he accepted the estimate in The Engineer that within the next six years the safety cushion of excess capacity will drop to a trivial 3 per cent. All that he could say in reply was that the Government,
	"welcome all informed sources to the general debate on our future energy needs".—[Official Report, 17/11/03; col. 1773.]
	That is not an answer to such a serious question. I hope that the Minister can tell us something about that.
	While on energy, I am disappointed to find out that the Government's own research has shown that they will fail to meet the UK targets to cut carbon emissions by no less than 1.3 million tonnes. From the legislative programme scheduled for the department that I shadow, I see that I and my colleagues—my noble friends Lord Hodgson and Lord Attlee—are in for a busy Session. However, I hope that the content of the Bills will not be as controversial as some of the others foreshadowed in the Speech.
	In the mean time, I close by adding the thanks of everyone on our Benches—in fact, I think, of the whole House—for the wonderful contribution that the right reverend Prelate has made to our debates over the years and in his valedictory debate. How appropriate it was that he was the last speaker before the winding-up speeches.

Lord McIntosh of Haringey: My Lords, I join all noble Lords who paid tribute to the right reverend Prelate the Bishop of Hereford, who made a fine, passionate speech. He was ingenious in getting it into this debate rather than the environment debate next week. We shall miss him—in particular, the noble Lord, Lord Whitty, will miss him—in any future debates on hunting.
	I shall start by addressing the hound of the Baskervilles issue—the dog that did not bark in the night. In the range of subjects covered, there was hardly any substantive debate on macroeconomic policy, which I thought would be at the centre of our debate. In the context of the sharpest deceleration of world growth, including world trade growth, for around 30 years, the United Kingdom has performed incredibly well.
	The noble Lord, Lord Marlesford, asked me to pay tribute to the work of the noble Baroness, Lady Thatcher, and her government, from 1979 to 1997. He knows—because I have done so often—that I acknowledge that economic recovery began in the few years before 1997. But, if he thinks that I shall pay tribute to the whole 18 years of Conservative government, he has another think coming. Let me make the contrast: under the Conservatives, the United Kingdom was always first in and last out of any recession. Now we have the fastest growth in the G7, double the growth in the euro area and the longest unbroken economic expansion on record. From 1979 to 1996, we had the most unstable economy in the G7; since 1997, we have had the most stable economy in the G7.
	There has been an increase of 1.7 million jobs since 1997. Unemployment is close to the lowest levels in a generation. In ILO terms, we have the lowest unemployment in the G7. I see no reason to apologise for that or the contrast between that and the performance of the previous Conservative government.
	Since 1997, inflation has been on average 2.4 per cent, which is almost exactly the target that we set ourselves.

Lord Marlesford: My Lords, since the noble Lord mentions inflation, perhaps he should remind us that under the previous Labour government inflation reached 25 per cent in a year. One of the major achievements of the Conservative government was to set us on a course of low inflation, with which, I am glad to say, this Government have continued.

Lord McIntosh of Haringey: My Lords, I accepted the challenge set by the noble Lord, Lord Marlesford, to contrast the performance of this Government with that of the Conservative government. If he thinks that I have finished making that contrast, he has another think coming.
	On public finances, based on the most cautious assumption, we are on track to meet the fiscal rules that we have set ourselves over the cycle. Public sector net debt is expected to stabilise at 34 per cent of GDP. We have increased investment in industry and business. Inward investment in this country is 639 billion dollars, the second highest after the United States.

Baroness O'Cathain: My Lords—

Lord McIntosh of Haringey: My Lords, I shall not get very far at this rate.

Baroness O'Cathain: My Lords, I think that the noble Lord will, actually. I thank him for giving way; however, he is being a little unfair. I ended my speech by saying that we had one of the strongest economies, and one of the better industrial bases, in the world. We acknowledge all that. There has been huge acknowledgement by the noble Lord, Lord Newby, of the achievements. In this debate, all I want is to ensure that it continues.

Lord McIntosh of Haringey: My Lords, that is very noble. I am glad that party politics in this superior Chamber are dead.
	I shall recite the facts, as it is necessary to do so. Between 1979 and 1996, business investment in this country grew by 3.3 per cent; by contrast, between 1997 and 2002, it has grown by nearly 6 per cent. In 2002, business investment in this country was 27 per cent higher than in 1997.
	I am being discouraged from repeating the triumphs of this Government. I shall accept that discouragement and move to the specific criticisms expressed in the debate.

Lord McNally: My Lords, I wish to discourage the Minister from reading the speech that he wrote for a debate that did not take place, and ask him to answer the debate that took place.

Lord McIntosh of Haringey: My Lords, that debate ought to have taken place. I shall respond to the cursory criticisms expressed. The noble Lord, Lord Newby, mentioned our forecasting record. References were made to the OECD report published today. The report states:
	"The UK economy continues to exhibit greater resilience than most other OECD countries".
	It further states:
	"GDP rebounded in the second and third quarters of 2003, implying growth over the year to the third quarter of 2%, while output in the other major European economies has either fallen or stagnated".
	That is not a critical report from the OECD; nor does it lead anyone to believe that we have abandoned prudence, or that our prudent policies have been unsuccessful.
	As regards the quality of our forecasting, since 1997 Treasury growth forecasts have, on average, equalled or outperformed independent consensus forecasts for both current and year-ahead forecasts. Our forecasts have also outperformed those from prestigious organisations such as the OECD, the IMF, the European Commission and the National Institute of Economic and Social Research.
	Noble Lords on all sides of the House asked about the problem of government borrowing. I wish to respond to the noble Lord, Lord Tomlinson, in particular, who claimed that particularly high government borrowing would affect interest rates. Due to our participation in global capital markets, the relationship between government borrowing and short-term interest rates, at any rate, which used to be very close, is much weaker than it was. The proper comparison is to be made with long-term interest rates. The Japanese economy supports that argument.

Lord Higgins: My Lords, I am grateful to the noble Lord for giving way. Does that mean that the Government propose to finance their deficit by borrowing abroad?

Lord McIntosh of Haringey: My Lords, if I were to express any view on future government economic policy before the Pre-Budget Report, which will take place in the next two weeks, I would not be standing at this Dispatch Box for very long.

Lord Tomlinson: My Lords, I hesitate to interrupt my noble friend, but, as he specifically referred to what I said, and quoted the good parts of the OECD report, will he not acknowledge that the report expressed concern about the level of UK borrowing?

Lord McIntosh of Haringey: Yes, my Lords, it did; however, I quoted the summing-up of the OECD report on the UK economy. Nobody would claim that every sentence and paragraph of the OECD report was favourable.
	Several noble Lords expressed the genuine and widespread concern, which is legitimate, about household borrowing. However, to some extent, the concern is based on a misunderstanding. The important point about the sustainability of household debt is not the amount of the debt itself but its relationship to net wealth and the cost of servicing that debt. On both counts, when net household wealth has gone up by 40 per cent since 1997 and the servicing of household debt is substantially less important than for many years, I would argue against some noble Lords who have taken part in the debate today. Although the level of household debt can be a tragedy for individual families and we must do everything that we can to avoid that tragedy, in macroeconomic terms it is not the problem that some suggest it to be.
	Of course, there is concern about productivity levels and the noble Lord, Lord Tomlinson, and others expressed that. It is indeed the case, as my noble friend Lord Sainsbury said clearly and fairly in his opening speech, that our productivity levels need to be raised. However, he also said, in a fair answer to the debate that subsequently took place, that we have been taking action to deal with that problem—in the Enterprise Act 2002, to promote competition, in providing research and development tax credits, in creating enterprise areas in deprived parts of the country and in many other respects that I do not have time to mention. It is a serious problem that we are addressing seriously.
	The noble Lord, Lord Sheldon, was concerned about the balance of payments. He said that he had been putting the argument for a competitive pound for many years. Of course, deficits do rise, but so does world trade. The true measure of the deficit is not in so many million pounds per year, but the percentage of gross domestic product. In 1989, the trade deficit as a percentage of gross domestic product was 4.8 per cent. In 2002, it was 4.4 per cent—going in the other direction. The current account deficit was 5 per cent in 1989. It is now 1.8 per cent. I hope that that gives some comfort to the noble Lord, Lord Sheldon, on that issue.
	It is my duty to say something about the Bills that were not covered in my noble friend's opening speech. First, the Child Trust Funds Bill, which he did not introduce, has been the subject of debate to which I intend to respond. The Bill establishes child trust fund accounts for all children born since 1st September 2002. Our aim is to strengthen the real saving habit in future generations and ensure that all children have a stake in the wealth of the nation. It will give all 18 year-olds a financial asset and extend the opportunities available to them. The Government will give every child £250, with £500 for the poorest third of children. There will be an additional payment at age seven, again with more for the poorest children.
	The comments on the Bill were interesting, but, understandably, were made in the absence of a full explanation of the Bill, which I have certainly not given now. The noble Lord, Lord Higgins, thought that there would be a burden on parents because of the way in which the trust fund was administered, but it will be processed automatically when parents claim child benefit. There will be no claim to make or any paperwork required. The £250 extra will be available when a family's child tax credit claim is finalised, with no additional means test.

Lord Higgins: My Lords, I apologise for intervening a second time, but that was not at all the point that I made. My point was that charges will obviously be levied by those looking after the trust fund. Will such charges be limited to 1 per cent, as in the failed stakeholder case, or some higher figure? If the proposal is to progress sensibly, the industry needs to know the figure involved.

Lord McIntosh of Haringey: My Lords, I was coming to that point. I did not say that the first point was the only one made by the noble Lord. However, he did make it and it needed to be answered. He also asked whether the child trust fund would be available for the children of asylum seekers. No, it will not. It is based on claimed child benefit, which is not available to asylum seekers. He then asked, as he rightly said, about the charges that financial institutions will be able to levy for child trust funds. We aim to announce a decision on the charge cap as soon as possible, but we must do that in conjunction with work being done by the Financial Services Authority on the sales regime for stakeholder products, of which this is one. A report will soon be published on that matter.
	The second Bill to which I wish to refer is the National Insurance Contributions and Statutory Payments Bill, which makes some useful improvements to the administration of national insurance contributions. It does not change the structure or rates of NICs or disturb the contributory principle. Since there was no comment on that point, I will not burden your Lordships with a full explanation.
	The third Bill that falls under the DCMS category is the Olympic lottery and horseracing betting Bill. Again, it is not in the Queen's Speech and I did not expect anybody to comment on it because the statement is being made today. However, it will enable the Government to deliver on a 2001 manifesto commitment.

Lord Newby: My Lords, will the Minister explain the principle under which Bills are announced in the Queen's Speech one day and a whole raft of other Bills are announced in the House the next day? It seems absolutely barmy.

Lord McIntosh of Haringey: My Lords, it has always been the case that the Queen's Speech has included the phrase, "Other measures will be laid before you".

Baroness Blatch: My Lords, I am grateful to the Minister for giving way, but the purpose of that phrase, which is conventional and usually adhered to, is for Bills that come up during the course of the year that have not been anticipated. I believe that it is unprecedented for a Bill not to be included in the Queen's Speech and to be introduced the following day.

Lord McIntosh of Haringey: My Lords, the Bill has not been introduced the following day. I am giving the House an announcement about it. Let us be serious. Everybody knows that the Queen's Speech has always been a summary of the legislative programme and that not everything in the legislative programme is included in the Queen's Speech. I have no apology to make on that matter.
	Finally, there was a reference in the Queen's Speech to a Bill that will not be published yet—the gambling Bill which is, as your Lordships know, before a joint committee of both Houses. When that work is complete, it will move from a draft Bill to a full Bill, and I hope it will receive the full approval of this House.
	I now move to other issues raised on Bills in the Queen's Speech in the course of today's debate. I refer particularly to those relating to pensions and energy because they have attracted the most attention. However, I wish to mention the employment relations Bill, the company Bill and requests for a consumer credit Bill. The noble Lord, Lord McNally, questioned whether the employment relations Bill would examine legislation on secondary picketing. In 1997, the Government pledged to retain the essential features of employment law, including the employing of secondary picketing, which we have done. Current legislation is not concerned with secondary picketing but relates to changes strengthening the right of those who wish to be represented by a trade union and to strengthening protections for employees in lawfully organised official strike action.
	The noble Lord, Lord Newby, and the noble Baroness, Lady Thornton, mentioned the company Bill. As the noble Lord knows, this is not the full Company Bill. It was published in draft in two enormous volumes last year and the inevitably elaborate consultation is still taking place. I am grateful for what the noble Baroness, Lady Thornton, said about the community interest companies element of the Bill and rather than debating that matter now we will do so as the Bill goes forward.
	I was asked by the noble Baroness, Lady Miller, and the noble Lord, Lord Newby, about consumer credit and whether there would be a consumer credit Bill. The answer is "no". As I said earlier, we are working to address the issue of over-indebtedness. We will publish a consumer credit White Paper shortly that will lay out our policy on tackling over-indebtedness and updating legislation to ensure that it is relevant to today's market and will provide effective protection for all consumers. There is no threat or promise of immediate legislation on that matter.
	I now turn to the profoundly important issue of pensions. I acknowledge the expertise and skill with which views have been expressed in the debate. We want to achieve a shift in attitudes and behaviour among people of working age: they should actively and regularly plan for retirement. I agree with those who said—particularly those on opposite Benches—that this cannot be achieved by government alone. People must put more money into their retirement and some people will have to work longer.
	At the same time, we must recognise that some people, particularly poorer people, cannot do that. Therefore, the state has a role in the provision of pensions. Our informed choice programme is designed to reach all people of working age. The highest priority must be to reach those who are most at risk of under-saving and who risk a drop in living standards in retirement. In response to the noble Lord, Lord Marlesford, that does not mean we are committed to raising the pension age, although this was also the subject of debate in the public services. The Government have proposed to raise the pension age—mostly from 60 to 65 years old. If that meets approval on Benches opposite, I do not mind.
	As regards reform of the state pensions system, we are committed to developing policies that enable pensioners to share in the country's rising prosperity. It is simply that we do not believe that an earnings link is the right way to do it. Since 1997, our strategy has been to target support on the poorest pensioners, thus providing a balance between a solid foundation of support for all while targeting help on those who need it most.
	I do not need to say much about the so-called black hole, to which the noble Lord, Lord Marlesford, referred. Of course, investment returns fluctuate. Of course, it is unfortunate that FRS17 requires companies to reflect those fluctuations—which have been in both directions in the past couple of years—in their balance sheet. Sometimes that leads to companies taking a pensions holiday; sometimes that leads to companies making extra provision. That is one of the problems caused by the accountancy profession.
	I was asked whether the Government would act as a guarantor. As an analogy, I simply ask one question. If we want to get rid of asbestos in industrial buildings, housing or anywhere else, is the way to achieve it for the Government to guarantee that if people do not do it themselves, the Government will pay for it? Surely that is not the case. Surely, it would be right for those who have benefited from the ups of pension finance, but are now sometimes risking paying the downs, collectively to pay for it. We shall seek to ensure that our fund will be conducted with the utmost sensitivity to the needs of industry. But for the Government to be the ultimate guarantor would be to move exactly in the wrong direction.
	I was asked about raising the age limit of 75 for buying annuities. Again, I shall just ask a question. We have a deal. People put money into their pension funds tax-free. Is it not right that people who did that should provide for their retirement and should not be a burden on the public purse? If we look at the number of people with a significant pension fund who, instead of buying an annuity at 75, could use the fund in another way, there would be more people costing the taxpayers money. That simply does not seem to be right.
	The final questions were about stakeholder pensions. I acknowledge that there are a high proportion of pension schemes which have no members. Again, I suggest that one look at the facts. Take-up depends largely on whether an employer contributes to a stakeholder pension scheme. If the employer contributes, there is a 70 per cent chance or more that the stakeholder pension will be taken up by employees; if the employer does not contribute there is only a 13 per cent chance that employees will take it up. Clearly, it is in the interests of employers to encourage stakeholder pensions. They can do that by contributing themselves.
	I believe that the final point raised was about the 1 per cent cap. The charge cap has been a great step forward for consumers. It has meant a clear charging structure. It has driven down costs across other products. There is no evidence that an increase in the cap will automatically result in an increase in take-up. What we need is a greater increase in awareness and understanding, not how much people are charged. Indeed, that is what we are addressing.
	Finally, I turn to energy. The debate turned largely on the nuclear option. We are not abandoning the option of new nuclear plant. If we were doing so, we would not encourage research to continue and we would not continue to train people through the sector skills councils. However, it is an option and it is not something that we have decided to do.
	I think that all noble Lords have welcomed the commitment to renewable energy sources. The renewables obligation will be backed up by direct government funding of almost £350 million in support of R&D and capital grants for emerging technologies. The energy Bill will make provision for further support by encouraging the building of renewables projects beyond our territorial waters. That may enable us to exploit the potential not only of future offshore wind farms, but also of wave and tidal power schemes.
	The noble Lords, Lord Patten and Lord Marlesford, and the noble Baroness, Lady O'Cathain, raised the issue of security of energy supplies. We think that diverse sources of supply are the right way to deal with this. Renewable sources will help us to avoid an over-dependence on imports. The energy Bill includes a clause to enable international agreements to be brought into effect. I cite, for example, the agreement with Norway referred to in the debate.
	The noble Baroness, Lady O'Cathain, asked why nuclear power was not included in the definition of renewables. Nuclear fuel is not renewable and it is not for us unilaterally to change the definition of what is a renewable source of energy. This is set out in the EU renewables directive and quite rightly we have to comply with it in order to ensure that our objectives for renewables are subject to international comparisons.

Baroness O'Cathain: My Lords, I thank the Minister for giving way. All I wanted to say is that I hope the noble Lord will read carefully what I said in my speech. I suggested that the term "renewables" now refers to those fuels which do not emit noxious gases. Nuclear power does not do so and that is why I asked for it to be considered. Since I do not want to take up the time of the House, I would be grateful if the noble Lord could write to me.

Lord McIntosh of Haringey: My Lords, I do not believe that that is the case, but if it is I shall certainly write to the noble Baroness.
	I turn to the final point on energy made by the noble Baroness, Lady Miller. She raised the question of expenditure. Of course there is expenditure; that is why we have privilege amendments on legislation introduced in this House.
	I have overtaxed the forbearance of the House in responding to the debate, but I hope that I have been able to respond to as many as possible of the significant points that were raised.

The Lord Bishop of Hereford: My Lords, while I warmly thank the Minister for his kind words to me, perhaps I may press the point. Do the Government realise how serious is the threat of climate change, that it is getting worse, and that there is no strategy in place to deal with it?

Lord McIntosh of Haringey: My Lords, I think that our record in that area, in particular on pursuing our international obligations, complying with them and encouraging other nations to do so—not always successfully—is second to none. Of course we understand the importance of what the right reverend Prelate has said. We are devoted to the same ends. On that note, I shall sit down.

Lord Evans of Temple Guiting: My Lords, I beg to move that the debate be now adjourned until Monday next.
	Moved accordingly, and, on Question, Motion agreed to, and debate adjourned accordingly until Monday next.

House adjourned at ten minutes before five o'clock.